SecondLife Futures Market now entering Alpha Phase

Thanks to everyone for the early testing and feedback assistance so far.

The market can now be found at:

http://www.virtualfuturesmarket.com

I've added a couple more markets. You can trade (buy, sell, short and cover) futures contracts on such things as

- the future price of L$
- the population of SecondLife
- changes in stipend payments.

You can also add your own futures contracts and trade on those.

All futures contract trades on SecondLife related issues will be 100% commission free and will *very likely* remain so forever.

Right now, the website is entering an alpha phase, so if you wish to help test trading on these contracts please IM Iron Perth for an account.

There will be a semi-closed beta once the alpha phase has been completed, and I hope to go into production shortly after the 1.9.1 release.

(note: for those still using the old IP address, please update your bookmarks, as the IP address in use before may not be applicable in the future)

Cheers,

Iron.

You are my hero

Thx Eddy

I really hope the SecondLife VirtualFuturesMarket (VFM) will help people to hedge (kind of like insurance) against the negative impact of inflation and other disturbances in the economy.

For example, by purchasing L$ contracts you can *profit* if the L$ increases in price, thus offsetting any losses.

Of course, you would lose some money if the L$ were not to increase in price, however you profit more in your regular business if the L$ did not increase in price.

Fannie Mae, the mortgage giant, does something very similar with interest rate hikes. In order to ensure that interest rate increases do not negatively impact their business model they purchase derivative contracts (very similar to what you would do on VFM) around interest rate increases. This creates an underlying stability to their business.

Well I'll be damned. Please consider when you have enough volume, to post charts with the usual open-high-low-close bar format. Its easier, or perhaps just a close price line chart.

If you start listing options, it could get pretty interesting.

Options, yeah. Options should map directly into min/max contracts.

For example:

Let's say you wanted the call option to purchase L$ at 310 / USD after June 1st.

You could write a min/max contract saying that L$ will be 310 or greater by June 1st (I'd stipulate an average over a period of a week to avoid market manipulation), and then you could buy that contract and be paid out as soon as it does go greater and use that money to purchase the L$.

True, your upside potential is limited (you are, effectively, forced to cover/sell at pre defined points).. but that is only because the downside risk on someone else is limited as well.

I could go unlimited upside (and therefore someone is taking on unlimited risk), but that is .. risky. I'd have to start doing credit checks to see whether a person would pay if things went bad for them. This puts a lot of overhead on me and I have to start charging commissions on trades.

That being said, you can leverage (somewhat) the funds you have on deposit with the system as developed.

For example: I do not do what lindex/gom did by withdrawing the funds from your account when you make a trade, but rather, I put them on the queue and only invalidate the trade if you do not have the required funds in your account when your trade comes to the head of the queue for execution.

What this means is that you can make an unlimited amount of trades, and as long as you have funds when it comes to transact, your trade will go through. This has some downsides, but the extra liquidity and leveraging it enables I believe are worth it.

To further this example: let's say you had 300 contracts at a market value of 50 L$ each, and wanted to purchase 600 contracts at 25 L$ on a different market. Normally, you'd have to wait to sell before writing the buy order, but with this system you can write the sell and buy orders at the same time ... as long as they execute in the right order, you are good to go.

If you are a market maker, this is really cool, because you might be writing buy/sell orders on dozens of different markets and as long as your making good markets you won't need to carry enough float for every single order you write.

The other nice advantage to 0/100 contracts is that the # directly maps to a probability that a particular event will occur. For example, if 60 is the price of the L$ contract reaching 400, then that means there is a 60% chance that the L$ will reach 400.

Well, you could go the margin route - just specify a minimum that needs to be maintained to put in trades to begin with.

I'll be keeping an eye on this. Interesting.

Thank you for all the people who have sent in feedback so far.

I've released an update with some more easier to use clicktofill functionality as well as trading API for market makers which includes functionality for such things as:

- cancel all orders
- create an order
- cancel order
- get market stats

This API can be used for people who want to write their own custom trading platforms.


Also, to help trade smarter on the SL contracts, I have worked up some graphs of SL Economic stats, including:

- MTD Land Auctioned
- MTD Islands Owned and Added
- Total Acres and Residents
- Total Parcels and Acres
- Sinks (Accumulation graph)
- Sources (Accumulation graph)
- Last 60 days users
- Total L$ supply

Check it out!

http://www.virtualfuturesmarket.com/futures/view/pages/cntrl2.jsp?pg=allgraphs

(note: should update every day, also let me know if you see any errors or have any requests)

Your last link seems to have been misconflugalized or something. I can see its an... .asp link possibly? It just didn't make it for some reason.

Whups! Thanks Maxx,

The link is:

http://www.virtualfuturesmarket.com/futures/view/pages/cntrl2.jsp?pg=allgraphs

I don't understand stuff like this, practical money related stuff.

Is a futures market based on the population of SL just gambling?

In the same way that insurance is gambling, yes.

You are basically betting that the population (or the L$ or whatever) will increase or decrease (in numbers, value, etc).

Some people might simply make this bet because they have an educated idea whether or not the population will increase or decrease, some will make the bet simply because they want to speculate, and yet some others will make the bet as a 'hedge' against inflation, population declines, etc.

It's the same that you might do with insurance.. Some people will make the bet that they might die tomorrow. If they win the bet (which they really don't want to win, of course) they get paid off in a big way. If they lose the bet (the best case), they simply lose their monthly premium fees.

Yet another example, is options or derivatives trading.

You can purchase options betting that the S&P will not crash (instead of, for example, that the SL population will not crash).

You wish to lose this bet, because it is likely your portfolio is invested significantly in the market. If you win, of course, you get paid off significantly and this helps alleviate the loss from the decline in the stock market.

In the end, of course, it's all gambling. Investing usually is, the stock market is very much a poker game. If you can win your bets more than 50% of the time (including fees) you'll win the game of investing.

Some betting, of course, is less productive than others .. for example, betting on a sports game. Though the argument could be made that a bar might make the bet in order to hedge against lost revenue if say their home town team doesn't make the playoffs.

Betting a card game, say blackjack for example, or a roulette wheel spin .. well I can not fathom of any productive reason you might do that, except for entertainment.