RIP Philo

Naked Short Selling Football Tickets

>Short-sellers had sold tickets to the game, but they found that they couldn't backfill their orders, meaning they had the choice to buy at a loss or decide to leave customers without the tickets they paid for.

>StubHub shut down its site for the game days before, forcing it to make good for hundreds of people who bought tickets but whom the site found out wouldn't be receiving them.

Apparently, the online ticket brokerages let you sell tickets you don't have.  Then, if the price spikes, the short seller defaults.  To protect its brand, StubHub bought the missing tickets at a loss, to make customers whole.  (but if you read the fine print, they have no legal obligation to do this)
Permalink FSK 
January 8th, 2018 6:22pm
So basically, Stubhub is writing put options for short sellers at no cost. Sweet deal.
Permalink Shylock 
January 8th, 2018 6:38pm
Actually, they're writing free call options, but you get the idea.  (They're writing call options because StubHub only loses when the price skyrockets.  If they were writing put options, they would only lose when the price tanks.)
Permalink FSK 
January 8th, 2018 6:59pm
naked short + free call = put
Permalink FSK 
January 8th, 2018 7:00pm
I always get those mixed up lol...
Permalink Shylock 
January 8th, 2018 7:12pm
There's tons of get rich quickers that have studied books and taken seminars in various economically destabilizing arbitrage schemes. The trick is to know enough law to make sure you're not technically engaging in fraud.
Permalink Reality Check 
January 8th, 2018 7:14pm
You make sure that the naked shorting is done in a shell corporation with no assets.  If StubHub tries to collect, there's nothing there.

Of course you intended to deliver the tickets.  Who know that the ticket price would skyrocket after Georgia won the semifinal?  (It was obvious to anyone that the ticket price would skyrocket if Georgia won, and tank if they lost.  Hence the arbitrage opportunity.)

These lessons were learned in the stock market (no shorting without collateral), but the online markets seem to forget.  Really, they should ask for collateral, in the form of $$$ or tickets.

And if these ticket exchanges are allowing short selling, then they should be regulated like exchanges or futures markets.
Permalink FSK 
January 8th, 2018 9:06pm
And clarifying the above point: Stubhub has a short call (they lose when the price skyrockets).

The naked short sellers have a synthetic put.  They own the long call plus a naked short.

If the price tanks, the call is worthless, and they cover their naked short for a profit.

If the price skyrockets, they exercise their call and default on the naked short.  (actually, they cover their naked short by exercising the call)

When StubHub loses enough money on these shenanigans, they'll tighten up their rules on short selling.
Permalink FSK 
January 8th, 2018 9:11pm
There's going to be another arbitrage opportunity with Super Bowl tickets (in Minnesota).  If Minnesota, the home team, qualifies for the Super Bowl, the ticket price should skyrocket.  If Minnesota loses, the ticket price should fall.
Permalink FSK 
January 8th, 2018 9:12pm
If I bought tickets, airfare, hotel, and rental car, then found out I didn't have tickets, I would be very upset.
Permalink Legion 
January 8th, 2018 10:23pm
You had the tickets.

Stubhub has your back.

Thank you for choosing StubHub.

Please come again.
Permalink C 
January 8th, 2018 10:33pm

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