Author Topic: Arbitrage  (Read 2216 times)

Orin!

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Arbitrage
« on: July 20, 2018, 06:49:49 PM »
So recently I found several brand new items heavily discounted and bought them for 1k and turned around and resold then (after fees and shipping) for 1.5k. This was my first experiment with arbitrage.

It got me thinking how could this be done on a larger scale?

Or even with currency? And are there any mediums that actually allow you to buy or sell currency at live market rates with very low commission per transaction? Like Binance lets you trade crypto at a .05% (.0005) - is there a similar exchange for fiat currency? Or have banks monopolized this?

Any other successes people have had with arbitrage? I would think this is a side gig if mastered as a badassity could help on become FI faster.

maizeman

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Re: Arbitrage
« Reply #1 on: July 20, 2018, 07:02:01 PM »
Essentially the easier it is to buy and sell on a large scale the more everyone else has already gotten there and automated all the good arbitrage opportunities. As a result currency markets tend to be very efficient, even crypto ones.

For a while buying and selling used textbooks worked, but then big companies got into that. https://www.npr.org/sections/money/2017/10/18/558564675/episode-581-free-money
(Fascinating podcast on arbitrage generally even before you throw in the textbook example.)

Garage sales are probably always going to present potential mispricings because its very hard to scale, and hard to purchase if you're not already local. Craigslist a little less so but there is still the potential to find significant pricing inefficiencies since it just doesn't scale.

Malkynn

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Re: Arbitrage
« Reply #2 on: July 21, 2018, 05:10:46 AM »
Essentially the easier it is to buy and sell on a large scale the more everyone else has already gotten there and automated all the good arbitrage opportunities. As a result currency markets tend to be very efficient, even crypto ones.

For a while buying and selling used textbooks worked, but then big companies got into that. https://www.npr.org/sections/money/2017/10/18/558564675/episode-581-free-money
(Fascinating podcast on arbitrage generally even before you throw in the textbook example.)

Garage sales are probably always going to present potential mispricings because its very hard to scale, and hard to purchase if you're not already local. Craigslist a little less so but there is still the potential to find significant pricing inefficiencies since it just doesn't scale.

Agreed.

The world of scalable resale is heavily saturated by big players.
I was just at a lunch with currency brokers the other day; it's a huge business that an independent would have a hard time competing with.

You can easily make money reselling things, it's just hard to make a lot of money reselling things at scale.

grantmeaname

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Re: Arbitrage
« Reply #3 on: July 23, 2018, 06:44:18 AM »
How do you know the "correct" price of GBP in USD?

Orin!

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Re: Arbitrage
« Reply #4 on: July 23, 2018, 08:33:44 AM »
Type in GBP to USD in google. That gives you the live market exchange rate. If you are getting a different quote from your bank then they are adding in fees (and usually do.)

grantmeaname

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Re: Arbitrage
« Reply #5 on: July 23, 2018, 08:34:54 AM »
How do you know what the price "should be"? If all you know is the price now, there is no arbitrage opportunity.

Paul der Krake

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Re: Arbitrage
« Reply #6 on: July 23, 2018, 08:37:31 AM »
Who on earth would buy currency from you?

FreelanceToFreedom

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Re: Arbitrage
« Reply #7 on: July 23, 2018, 10:21:12 AM »
I sold on eBay for several years, mostly doing retail arbitrage. You can certainly make some money, but it's difficult to scale.

Black Friday (and the week leading up to it) presents great opportunities for retail arbitrage. Personally I'd load up on popular video games and sometimes DVD sets (TV series) at a deep discount, and resell them on eBay. I'd order literally hundreds of games from Best Buy, Amazon and the like and turn my closet into a mini electronics store.

Margins are fairly low (5-10% typically, occasionally more) so it's a volume thing. And it's difficult to scale. Sourcing outside of sale windows is difficult as well.

That said, I'd have a busy holiday season (mid Nov through mid Jan) and clear maybe $4-$8k in profit. Lot of work, though. Not really worthwhile to do retail arbitrage year-round.

There's a site called OrensMoneySaver or something like that that covers arbitrage opportunities.

Orin!

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Re: Arbitrage
« Reply #8 on: July 23, 2018, 05:40:17 PM »
Ok so scratch the concept on currency

@FreelanceToFreedom

I checked out that site orensmoneysaver (maybe it should have been Orin!moneysaver...) and it looks like he has not been updating it much for 2 years.

Otherwise you say you cleared 4-8k on a busy holiday season reselling items bought at discount on Black Friday or the week leading up to it, but that was on 5-10% margin? As in you put up 40-80k to clear 4-8k at 10% margin? And if it was down towards 5% it would be much higher front cost. With those numbers it seems not worth it. If you are talking fronting 10k to resell on eBay on the side to put 3-4K profit over a couple of months of side line activity that sounds better.

And did you profit on this last holiday season? Specifically on dvds and tv show dvds? Seems to make that market of demand for those items may be going down.

AccidentalMiser

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Re: Arbitrage
« Reply #9 on: July 24, 2018, 06:49:00 PM »
What you are doing is buying stuff at a low price and selling it at a profit, correct? 

Unless the internet has redefined the meaning of the word, that's just plain old commerce. 

Arbitrage is something different: (from Merriam-Webster) the nearly simultaneous purchase and sale of securities or foreign exchange in different markets in order to profit from price discrepancies.

Now, back to my Lair of Pedantry!

grantmeaname

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Re: Arbitrage
« Reply #10 on: July 24, 2018, 06:58:24 PM »
There's no reason arbitrage needs to be securities or currencies.

AccidentalMiser

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Re: Arbitrage
« Reply #11 on: July 24, 2018, 07:18:51 PM »
There's no reason arbitrage needs to be securities or currencies.

OK, when I went to business school, that's what it meant.  Buying and selling stuff was called buying and selling stuff.  I'm prepared to accept that the definition has expanded.

grantmeaname

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Re: Arbitrage
« Reply #12 on: July 24, 2018, 07:22:15 PM »
I think the risklessness part of it is important ... otherwise it's just having inventory. But you could have back-to-back sales of physical assets just like securities.

maizeman

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Re: Arbitrage
« Reply #13 on: July 24, 2018, 07:32:26 PM »
Agreed. So you could imagine if pork belly futures for January delivery were selling at $200 cwt, and pork bellies were currently selling for $100 cwt, you could buy pork bellies now, sell the January future, and pocket the profits (less whatever the cost of storing the pork belly for six months). That would be arbitrage over time.

Of course the very fact that this is essentially a license to print money guarentees you'll almost never see pricing like this (unless the cost of storage is high, or total capacity for storage is low).

AccidentalMiser

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Re: Arbitrage
« Reply #14 on: July 24, 2018, 09:09:32 PM »
I think the risklessness part of it is important ... otherwise it's just having inventory. But you could have back-to-back sales of physical assets just like securities.

OK, thanks for the clarification. 

Orin!

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Re: Arbitrage
« Reply #15 on: July 24, 2018, 09:13:03 PM »
What I mean by arbitrage in relation to goods - i ran into a really good deal somewhere. I listed the item on EBay and had an immediate buyer. I then purchased the item and even shipped it directly to the eBay buyer with a gift receipt. Mark up was 50% of my purchase price but still well below retail.

This was a one off and not scaleable. But was just wondering if this area of arbitrage had been mastered by anyone on MMM.

Malkynn

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Re: Arbitrage
« Reply #16 on: July 25, 2018, 06:42:34 AM »
What I mean by arbitrage in relation to goods - i ran into a really good deal somewhere. I listed the item on EBay and had an immediate buyer. I then purchased the item and even shipped it directly to the eBay buyer with a gift receipt. Mark up was 50% of my purchase price but still well below retail.

This was a one off and not scaleable. But was just wondering if this area of arbitrage had been mastered by anyone on MMM.

Yes, many people on the forum do some form of reselling.

I think you will get far more relevant responses if you title your thread "Anyone into reselling?" rather than "arbitrage"

FreelanceToFreedom

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Re: Arbitrage
« Reply #17 on: July 25, 2018, 01:07:56 PM »
Ok so scratch the concept on currency

@FreelanceToFreedom

I checked out that site orensmoneysaver (maybe it should have been Orin!moneysaver...) and it looks like he has not been updating it much for 2 years.

Otherwise you say you cleared 4-8k on a busy holiday season reselling items bought at discount on Black Friday or the week leading up to it, but that was on 5-10% margin? As in you put up 40-80k to clear 4-8k at 10% margin? And if it was down towards 5% it would be much higher front cost. With those numbers it seems not worth it. If you are talking fronting 10k to resell on eBay on the side to put 3-4K profit over a couple of months of side line activity that sounds better.

And did you profit on this last holiday season? Specifically on dvds and tv show dvds? Seems to make that market of demand for those items may be going down.


I would usually work with around $20k of capital at a time, but I'd be continually buying and selling so turnover was quite quick. I also would use some float from credit cards to buy a bit more than I had the cash for, and pay off before the due date. Not too intelligent, but it worked.

Holiday margins were probably a bit better, maybe 8-12%, but I never did a great job of tracking everything precisely. Overall, it probably wasn't really worth it, but I enjoyed it at the time and didn't have much else to do

sol

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Re: Arbitrage
« Reply #18 on: July 25, 2018, 02:42:59 PM »
My sister owns an "antique store" and so she buys and sells things for a living.  She rents a storefront to store it all, but does most of her business online now.

She has fascinating stories about what sells and what doesn't, based on recent trends.  For a while she was buying and reconditioning old cast iron pans.  Then it was antique tape measures for hipsters who fancy themselves budding carpenters.  She deals in figurines, typewriters, vinyl, vintage pinups, and chintzy collectibles like old comic book stuff.  Her biggest profit center, though, is reselling old furniture she buys at estate sales.  MCM chairs are made of money.

She says most of the shops in town have to specialize, because no single person can possibly know enough to make money with both sterling silverware and old watches.  Each subcategory of popular item has a devoted following of rabid fans who will pay top dollar, but you have to find them (usually on social media) and you have to know what something is worth before you buy it for resale.  She passes on loads of stuff that looks profitable, just because she doesn't know enough about it. 

And lots of people will just bring her random shit, looking for a quick score, so she has to verify it's not stolen, and turn away a lot of tweakers. 

It's a business, but not a very good one.  She works crazy long hours, makes very little money, and doesn't have health insurance.  Not at all recommended, unless you really love old junk.

Arbitrage

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Re: Arbitrage
« Reply #19 on: August 08, 2018, 01:38:19 PM »
Yes?

grantmeaname

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Re: Arbitrage
« Reply #20 on: August 10, 2018, 10:24:13 AM »
sup buddy

^post of the year right here