Free Money: Ethical Trading.

Things move quickly in the world of Free Money.  After the first entry in the series the plan was to hold that position until May 1st and then collect all the monies.  However, as you know the price of gold has been hit pretty hard lately and so the market has pretty much given up on these stocks.  With no other tempting opportunities, there was no plan to cash out the position even though the contract values have almost moved to 100% of the closing levels of $0 and $1.

Now, before we go on to the changes made to the portfolio let’s remember that there was no real mention of ethical trading or trading that was going to save the world.  The comfort level on this trade is definitely not at maximum but making it does not affect the event itself; it does not encourage it nor strive to prevent it.

At about 3pm today it was announced that France and Britain are claiming that the Syrian Government had used chemical weapons on the rebels on more than one occasion over the last few months.  We have heard similar things in the past but in this instance France and Britain are claiming that they have eye witness accounts as well as soil samples that have tested positive for traces of chemical weapons.  How can this information be used to grow our current capital?  Perhaps you are thinking oil prices or maybe use the money to buy a single stock in Raytheon or some other weapons manufacturer because Obama will now attack Syria.  Both of these are good guesses but remember right now the money is on a prediction market.  One of the contacts on this market is:

“Syrian Government to deploy chemical weapons in Syrian Civil War before 1 July 2013”

Paying $1 if they use chemical weapons by July 1st or $0 if they do not. The story needs to be reported by three major news outlets to payout. The lowest price available on this stock was $0.06 or an estimated 6% chance of this event occurring. This is where we will try to take advantage of the situation.  Cash was needed and in the hurry to liquidate part of the position a mistake, the first of many in this series, was made.

To free up some cash the first action was to sell the stocks in:

“London Fix AM Gold price to be LESS THAN US$1,570 on 1 May 2013”

With 48 stocks on hand 25 were sold at $0.95 and 23 were sold at $0.937 giving a total cash out of $45.301.  The initial investment on this position was $24.6432.  Total return: 83.8%.  Pretty good for a first round. The mistake was that the short position would have been a better choice for liquidation.  With the current price of gold the stocks were going for about $0.002 and so the amount lost due to an early exit would have been less.  Oh well, still good returns and a lesson learned.

On to our new position. The first stock was selling for $0.06 but, as mentioned, this is a very small market so by the time the newly acquired cash was all spent the average price paid for this stock was $0.1987.  So this is the new position.

Syrian Government to deploy chemical weapons in Syrian Civil War before 1 July 2013

+223 (Long) Avg.Cost: $0.1987.
Total Cost: $44.3101

Gold price to be greater than   or equal to US$1,570 and less than US$1,600 on 1 May 2013

-50 (Short) Avg.Cost:$0.3018.
Total Refundable Cost(to cover largest possible loss): $34.91

With some trading fees the new total (with $0.13 cash) is: NZ$79.3501.  The large number of decimal places is just because some of the contracts are so small that the site uses four decimal spots.

So now you are probably asking why we kept some of the initial portfolio rather than cashing out everything and putting it into the chemical weapon stock.  This was considered but the chemical weapon usage still needs to be verified and so there is the possibility that that stock will get cleaned out if the claim is false or it is after July 1st with it is announced. This series would not be much fun to read if all the money was gone in three trades. So unless gold makes a comeback before May 1st the largest possible overall loss from this position is NZ$10.


Introducing… Free Money

This is the first post in a new series called Free Money. The plan is to start with $50 Canadian and see how fast it can be grown, or lost, online.  Any online site is fair game but there will be no buying and selling on sites like eBay. The experiment will be limited to prediction contracts, equities, forex, bets, whatever can generate a return without actually producing a physical good.

With such a small amount of starting capital it is hard to really get into any serious trading online and so we will start in the minor leagues.  Prediction markets have popped up in the mainstream news over the last few years and are perfect for our needs. The contracts are cheap and have defined payoff dates so they make a good place to begin. The merits of various prediction markets such as inTrade (not currently operational), iPredict, Betfair, etc. are discussed in many places online so we will not cover the benefits and shortcomings of each here.  If a particular service is used then it will be mentioned but no single service is going to be endorsed. A new post will be made after every transaction is performed. Let’s get started.

On Thursday there were rumours that Cypress was going to sell about 500 million euros worth of gold to help with their financial problems.  The goal is to find some way to benefit from a drop in the price of gold.

I decided on iPredict for this first transaction. For anyone not familiar with iPredict the contracts have hard deadlines.  The contracts pay $1 if the event occurs and $0 if it does not. The price is always between 0 and 1 dollar and is meant to indicate the chance of the event occurring.  So a contract selling for 45 cents means the event has a 45% chance of occurring. If you disagree with the number then you enter the market and make your money. You can either buy or sell contracts and yes you can sell short. Because of the small size of the prediction markets you normally cannot just decide a price is appealing and then buy/sell as much as you like. There are only so many contracts available and their values can vary quite a bit if you buy more than 5 at a time. This means that in some cases you need to spread your prediction around to a few different contracts.

The London PM price of gold on Thursday April 11th was US$1,565.00. There were two predictions of intrerest and after a few quick calculations and trades the current position is:

London Fix AM Gold price to be LESS THAN US$1,570 on 1   May 2013

+48 (long) Avg.Cost: $0.5134.
Total Cost: $24.6432

Gold price to be greater than   or equal to US$1,570 and less than US$1,600 on 1 May 2013

-50 (Short) Avg.Cost:$0.3018.
Total Refundable Cost(to cover largest possible loss): $34.91

After trading fees, 10 cents cash remained.  Total Cost: NZ$59.6432

The original plan was to trade $50 Canadian dollars but iPredict is in New Zealand. NZ$60 was deposited and there was a NZ$1.05 deposit fee. So in the end the total investment was about CDN$53.14.  To make all future posts easier our starting amount will be considered CDN$55.

The contracts are complete on May 1st 2013 but since this is a prediction market they can be traded at any time.  The plan is to keep them until the contract date but if there are any changes you can be sure that you will see them here on If all goes according to plan the free money should be flowing in no time.


Recent WordPress Brute-Force Attacks

Over the last few weeks this site has been subjected to a brute force attack. I took it as a complement since it is the second hack attempt this year, the first being successful. My site must be in high demand.  The botnet is using the login name “admin” and then trying to guess the password.  So essentially this an attack targeted at people that install the WordPress system and leave everything on the default settings (my login is admin1, of course).  It seemed fairly harmless as I was only getting about 5 attempts an hour in short bursts.  Even if I had a user with the name admin, at that rate the password would never be guessed.

Earlier this week the login attempts started accelerating and I decided to look into this a little more.  Turns out this is a actually a massive attack on all WordPress sites across the internet.  You can get the details from Ars here. Not being targetted specifically is a bit of a relief but kind of a let down as well; I guess the site is not in that high demand after all.

So if you are running a site/blog using the WordPress system then you need to login and make sure that you do not have an account named admin.  For now it seems that unless you are in control of your hosting server then the best bet is to wait.  Not the most reassuring advice. Installing an IP logger on your login page will give you an idea of the size of the attack but installing any of the more server hungry PHP-based login security plug-ins is probably not a good idea at moment unless you know what you are doing.  And really, if you have your admin account set to “admin” then you really do not know what you are doing.  If configured incorrectly, some login security plug-ins will cause your server to crash under such a larger number of requests.  If you do insist on using admin as your login name then at least follow XKCD’s advice on passwords.