Category Archives: Free Money

US Election. Money Where My Mouth Is

We have yet to look at the US election here at Webernet and we are not going to do it in any great detail for this post. Also, we have not done any Free Money posts this year so I figured it would be a good idea to combine the two ideas.

First idea was to place a standard bet on Clinton to win. Oh, Webernet.ca officially endorses Hillary Clinton.  Bold, I know. Unfortunately most bookies believe that Clinton will win so the odds are only 1.2 for her to win.  That is, only $20 profit on a $100 bet. Not good enough for readers of Webernet.ca.

Next came a look through other options like by-state bets, total electoral votes etc.  None of the options were both possible and well paying.  The ideal situation would have been the ability to parlay state by state results but no one is offering that option.

Instead, we will work under two assumptions.  One, Clinton will win the election. Two, Clinton winning the election will be good for the US dollar. This means we need to buy some USD.  Now simply going to a bank and asking for some USD is not the best way to make this bet.  Instead we will use Canadian dollars to buy some USD and then use those USD to open a leveraged position in an foreign exchange (FX) trading market.

There were some leftover funds in an FX account used in past Free Money posts and another $200 USD has been added to that total. Because of the way the FX platform works with holding fees we invested $55 and then $190 about 15 mins apart.  The FX pair selected? USA/Canada of course.  Average purchase price, $1.3379. Here is the screenshot of the “portfolio”.
usd2

As you see in that image the leverage rate is 400X.  Now we’re talking. 

The take profit level has been set to 1.35. Total investment: $245 USD.  What makes this method more interesting than a standard sports bookie bet?  Risk. The stop loss settings have been limited for the US election so the stop loss has been set to 1.3347.  If the USD drops $0.0032 before it increases $0.0121 against the Loonie then this bet is a total loss. If, instead, it rises $0.0121 first then the total payout will be $877.63 USD.

We deserve at least that much for having to live through this dumpster fire of an election season.

 

 

Free Money: February 2015

When last you heard from Free Money there had been a profit of $13.98 generated from mining and selling bitcoins.  Since then, the two video cards that were used to do the mining have been sold for $100 each.  Yes, that is some pretty fast depreciation but that is the way it is with computer hardware.

So for Free Money 2014 the final calculations looked like this.

– $367.29 Cost of mining hardware

+ $381.27  Sale and Conversion of bitcoins to Canadian dollars.

+ $200.00 Sale of mining hardware.

Total Profit.   $213.98 Canadian or 58.3%.

Definitely beat the market.

Since it is already February you can guess that deciding what to do for Free money this year was a bit tougher.  There was nothing that really jumped out as the cool new thing in the news.  Since I wanted to use the profits from last year there was also an initial capital limitation.  $218 is not enough to start a real trading account on standard stock markets and it is far below the requirements for day trading or forex accounts.  So what was needed was some sort of smaller market that was a little more legitimate than the prediction market used in Free Money 2013.

This year eToro will be the focus (and hopefully source of) Free Money.  eToro bills itself as a “social trading site”.  This means that you have a social profile much like Facebook or Twitter but the entire website is dedicated to trading.  You can trade standard stocks, limited commodities, forex and market indices.  I am going to try to describe it without sounding like an advertisement. Their big feature is being able to follow other traders and even copy them.  You can set a certain amount of your money to simply copy all trades made by another user on the site.  This creates superstar traders that everyone copies. It’s social!

Standard Stock is not the focus but they have an interesting setup.  You are allowed to buy fractional stocks.  So if a stock price is $40 and you want to invest $100 then you will get 2.5 stocks. The downside to this system is that they only execute standard stock orders once a day, right after market close.  I interpret this to mean that this site should only be used for medium and long term stock holds.  If you see your stock tanking in the middle of the day, you are along for the ride until the trades execute at about 4:30 EST. Fees are low, 0.1% of the trade value.

Forex, commodities (gold, silver, oil) and indices(Dow Jones, FTSE, etc.) are not limited in this way.  You can do leveraged, intraday trading in these categories. Fees here vary, mostly to do with the leverage amounts and how long you hold.

You can deposit as little as $50 USD into your account.  I decided that $200 USD would be my starting amount; in-line with the profits from last year.  Since the Canadian dollar is so weak right now that cost  $250.78 CDN.

Since I am just starting out on the site I decided to put through an easy trade to get a feel for the system.  Yes, they have a practice mode but that does not make my posts very exciting to read so real mode it was. I thought markets were a little harsh on MSFT after Microsoft announced their quarterly results I put an order in for $100.  The order was placed at lunch time and the trade executed at 4:30 EST as advertised. Price was $41.64; a little higher than when I put the order in but only by about 0.7%. So,

Current position:

Cash: $100
Portfolio: $100 Microsoft stock purchased at $41.64

Warning: This section will definitely make it seem as if I am trying to sell you on eToro.  They have a referral system.  However, it is a benefit to both parties.  If I refer someone to the site and they deposit $200 USD then we both get a free $100.  So if you deposit $200, you end up with $300 to trade with and I get an extra hundred.  Seems like a sweet deal to me and since this series is all about Free Money I am all for it.   If you are interested,  you can click here to use my referral.   Remember, you can always check it out with a practice account first.

So Free Money 2015 begins. The stakes are still low and it will take some serious effort to beat the last year’s 58% return but it should be a little more active than just setting a computer to process codes in a closet.

Free Money: July 2014 Update

So it is time again for an update on the Free Money series.  The original plan was to keep my system mining Bitcoins until the end of the year and then sell them all off.  With my last update I had estimated a break-even date near the end of the year.  Since then the price of Bitcoin has fluctuated a number of times as it tends to do.  At last update the price was sitting at around $500 USD but in general had been much more stable than usual. When it started to rise again I decided that it might be time to sell.  I transferred all the mined coins, a total of 0.56143691 BTC, to a Canadian exchange site that would allow me to transfer between BTC and Canadian dollars.

I set the sell price to $692 and the order closed in about 40 minutes at a price of $692.46999990 giving me $388.77822 Canadian in my account.  There was no fee for the exchange but there was a small fee to have them deposit the funds directly into my standard bank account.  Final outcome was a total of $381.27 which means that we have moved into the black.

 $381.27 – $367.29 = $13.98

 I know what you are thinking. WOW!!  That is FREE MONEY! Yes it is, just not a lot of it.

The main thing to remember here is that I still own the original mining hardware.  It is not worth the same as it was new, obviously, but it can be sold.  That would significantly improve returns on this setup.  The amount of hashing (number crunching) power that my two video cards put out now is so small compared to the overall network that they generate very little profit, even with zero power costs.  So I will keep them running for now until I decide what the next step of this year’s Free Money will be.  It would be too boring to simply sell the video cards and call it a day. 

 Checking in with Litecoin.  The coin that everyone thought would be “silver to bitcoin’s gold” before they understood the reality of the alt coin market is now sitting at $7.57 USD, so $8.21 CAD.

I originally could have picked up 14.3 coins which would have a current value of $117.40. So while the Free Money has not generated a lot of profits this year so far, it could have been much worse.

 So stayed tuned for more Free Money experiments this year and feel free to send in any suggestions.

Free Money: Quarterly Update

Almost immediately after starting this year’s Free Money experiment a cheap video card became available on Kijiji.  Since there was an extra slot in the mining computer the decision was made to increase the initial capital investment.  The second card cost $130 CAD. That brings the total investment up to $367.29 CAD.

The initial plan was to mine Litecoins but very quickly I discovered that there were hundreds (if not thousands) of different crypto currencies which are referred to as “alt coins”.  Most of them are slight modifications to the Litecoin algorithm. There are also online exchanges that allow people to trade between the different alt coins.  The markets operate much the same as forex but without the widespread use of extreme leverage.  The prices are highly volatile because the markets are, in general, very thin.  This leads to a massive amount of price manipulation across all the coins as people “pump and dump” a different coin each day.  Most of the time the prices are listed in Bitcoin; this means that no matter what coin you are interested in, the ultimate goal is to get it converted to Bitcoin at the highest possible exchange rate. Bitcoin is the easiest coin to convert to actual cash (called fiat by those in the know).

The algorithms for all coins are designed so that they are paid out at a pre-determined rate.  This means that as more people start mining the popular ones, the difficulty goes up and it becomes harder for someone with a small setup like mine to make any money.  This lead to the decision to mine smaller, lesser-known, coins rather than Litecoin.  The switch was made to mining Dogecoin, an alt-coin based on a popular internet meme, but that required sending all the coins to an exchange and converting them to Bitcoin.  A few small attempts at playing the markets were made but with all of the coins essentially being identical you are at the mercy of price manipulators.

For now, I have settled on a service that does all the work for you.  You simply point your processing power at their servers and they automatically switch to the most profitable coin at that moment, mine it, sell it and then pay out in Bitcoin.  It is the lazy man’s best choice for alt coin mining.

As you are likely aware the price of all crypto currencies took a massive hit when MtGox closed.  When this experiment began the price of 1 Bitcoin was around $1000 USD.  It is currently around $500 USD. I have mined a total of 0.44 Bitcoin since getting up and running.  Which means I have $220 USD ($244 CAD) if I were to cash out. The original plan was to be able to pay off the hardware in 3 months.  With the price drops and the fact that I don’t mine 24/7 because I also use this as my media PC, the time frame will need to be extended.  One of the other questions we wanted to answer was if it was better to buy Litecoins and hold them rather than buying the mining hardware.  With the money invested in both cards I would have been able to purchase 14.3 Litecoins.  At current prices that would be worth $179.63USD ($200 CAD).

Buy Hardware: $244 – $367.29 = -$123.29 CAD

Buy Litecoins: $200- $367.29 = -$167.29 CAD.

So for right now I am about $40 better off having purchased the hardware instead of the actual coins.  If prices stabilize at their current levels then I can expect to break even on the hardware purchase in a total of 6-8 months rather than 3 months.  Which means the free money should start to roll in at the beginning of October.

For the hardware nerds out there, here is my ugly mining setup. If you are wondering, I already owned all the extra gear so none of it was added to the costs.

Mining_Rig

Free Money Redux

I apologize to all of those who were following my Free Money series of posts as it has been quite some time since I gave an update.   Here is the short version: my portfolio was entirely cleaned out.  I had made some good gains on Yellen essentially being confirmed as the next chair of the Fed.  I sold my entire position in October and went all-in on Snowden leaving Russia before January 1st.  He did not need to go to any particular country, he just needed to leave Russia.  As you know, he (selfishly) did not leave and so all but $0.31 of my portfolio was lost.  Experiment, failed.

I suppose that putting all my money in one contract was dumb and I knew it at the time but it was still fun.  So the initial investment of $50 got as high as about $275 and finished with $0.31 and it was a fun time.  On to this year’s experiment!

The hot topic of the moment is cryptocurrency; the most popular of which is Bitcoin. I am not going to go into detail about crytocurrencies but here are the basics.  An algorithm is released that generates a block or code.  This is sent out across a network of people that are trying to break the code (a process called mining).  When the code is broken, whoever breaks it is granted some amount of the currency.  All of the systems work on this basis but there are variants of the software required to break the blocks.  Right now if you want to get into Bitcoin mining you need to purchase a computer specifically designed for the task.  These machines are expensive and so it prevents most people from getting into it.

The second most popular cryptocurrency is Litecoin.  It works in much the same way as Bitcoin except the algorithm allows mining on home PCs by normal people using their video cards. Both currencies will eventually reach a maximum number.  Bitcoin maxes at 21 million coins and Litecoin maxes at 84 million.  People often refer to Litecoin as the silver to Bitcoin’s gold.

So the Free Money experiment this year will be mining Litecoins. I own a gaming PC that will allow me to mine some but I also have a home theatre PC that does nothing most of the time so I decided to go out and buy a fairly inexpensive video card specifically for mining. Since this is a very popular thing to do these days most stores are actually sold out of the best cards for the task.  I settled on an overpriced AMD Radeon 7850. (Runs about 350-400 kH/s if you are interested).  Total cost of the card, including taxes was $237.29 CAD.  That is $216.46 USD which converts to 9.24 litecoins.  I do not pay for hydro so that is not an element of my profit calculations. According to most of the online calculators the card should pay itself off in about 3 months at current prices. Running both of my video cards should pay it off in about 2 months.  This is kind of cheating but we will consider the gaming PC a sunk cost.

So this year’s experiment is not nearly as active and exciting as last year’s.  It relies entirely on technology horsepower to break even.  The main goal is not to get my $237 dollars back but to hold the litecoins and hope that the price goes up.  We will also determine if just buying litecoins instead of the mining hardware would have been the smarter choice.

Hopefully this year actually ends up with some free money.

Free Money: Being too Right.

Last post I was looking for gold to drop in price before July 1st.  Well, it has dropped but the problem is that the contracts on the site I use are mostly for ranges of values.  Rather than just paying more or less as Gold goes up and down, the contracts pay $1 or $0 if the price of gold is between two boundaries. As gold was dropping from $1360 to $1180 I had to quickly try to unload my contracts.  It did not work very well and I was forced to settle them at 5-40 cents on the dollar. So a chunk of free money is gone. The lesson of the month is that I would have been much better off in real gold futures where the larger than expected drop would have just paid off better than expected.  In the rush to clear those boundary contracts I was able to short a few others in the other direction to help to offset the losses a bit.

The prices dropped so fast and far that even the August contracts started pricing themselves close to closing values.  To take my gold vengeance I was able to pick up a small amount of shorts on the August 1st price.

I was also able to short a few Microsoft contracts.  Microsoft had lost me some money in the past so this was a good way to make some back.  I shorted their July 1st price closing at $37.50. It was not a huge opportunity because I got in at around 5 cents.  This means that I will make about 5% when it closes.

Finally, the new long shot.  Last time I went with the Syrian chemical weapons and that was my biggest gain so far.  This time I picked up a contract titled “Edward Snowden to enter Ecuador in 2013”.  Ecuador gave asylum to Wikileaks founder Julian Assange in their embassy in the U.K. They also stopped trade talks with the U.S. recently because they said they did not want to allow them to have any leverage over them when it came to Snowden.  Also, Assange recently said that he is helping Snowden.  To me these events are good enough to pick up some contracts.  This was a new contract and there was not much going on with it so I put an order in for 50 contracts at 50 cents.  It sat for a day or so before someone finally picked it up.  This kicked off trading and the price moved up to around 65-70 cents. I was considering selling when the price dropped to somewhere around 2 cents. I am still not entirely sure what happened but I picked up a few more contracts cheap and with slippage the price was pushed back up to around 25 cents.  The nice thing is that it pushed my average price down so if this goes my way then the profits will be larger.

My portfolio as it stands is:

Edward Snowden to enter Ecuador in 2013 +77 (Long) Avg. Cost: $0.3961.
Total Cost: $30.50
London Fix AM Gold price to be greater than or equal to US$1,380 on 1 August 2013 -12 (Short) Avg. Cost $0.0809.  Total Refundable Cost (to cover largest possible loss): $11.03
London Fix AM Gold price to be greater than or equal to US$1,360 and less than US$1,420 on 1 July 2013 -37 (Short) Avg. Cost $0.3069.  Total Refundable Cost (to cover largest possible loss): $25.645
Micrsoft NASDAQ share price to equal or exceed US$37.5 before 1 July 2013 -30 (Short) Avg. Cost $0.0486.  Total Refundable Cost (to cover largest possible loss): $28.542

Total investment: NZD$95.717.  Cash: NZD$ 75.68. Total: 171.397.

Total change from last post: -19.064%.  Overall Free Money gain since start: 185.67%.

 

Free Money: June 19th

Today Bernanke stated that the Fed may consider scaling back the buying of bonds.  He made it clear that this was a long term plan and for the time being nothing would change.  The markets, of course, draw their own conclusions.  If the Fed stops buying bonds then the interest rate on them will go up making them more attractive to investors.  This means they will drop gold to get bonds.  Gold opened today at US$1365 an ounce.   I have taken a two contract position which in both cases pay off if gold is under $1360 on July 1st.  The reason for the split is, again, the slippage that occurs on this small market.  These were the largest positions I could get within the price range I wanted to pay.

Gold price to be greater than or equal to US$1,300 and less than US$1,360 on 1 July 2013

+70 (Long) Avg. Cost: $0.5554.
Total Cost: $38.878
London Fix AM Gold price to be greater than or equal to US$1,360 and less than US$1,420 on 1 July 2013

-25 (Short) Avg. Cost $0.360.  Total Refundable Cost (to cover largest possible loss): $16.00

Total asset investment: NZD$54.878.  Cash Remaining: NZD$156.89.

 

Free Money: Portfolio Update

Here we are nearing the end of June and if you have been following the news you know that the U.S. has confirmed that the Syrian government used chemical weapons against the rebels.  You are probably interested to know the state of my portfolio because I have been pretty bad at posting updates.  The main issue was that I got impatient for the contracts to close and started taking contracts in which I had less confidence. There were also a lot of small trades. Here is an excel file so that you can see each of them.  The summary goes like this:

I cashed out my gold contracts and then tried to make money as gold went the other way and it did not bounce the way I had hoped. Also went short on Microsoft breaking 32.50 (a five year high), which it then broke. That cash was all lost.  Then I cashed out some of my Syria stock to try to benefit from the Microsoft surge and it did not quite go high enough, that money was lost as well.  So, all in all, my impatience punished me every time.  I do recommend you look at the excel sheet as you will see where most of the losses occurred.

So now we move to the interesting part.  For the last couple of weeks I have been sitting with nothing in my portfolio other than the Syria stock.  France had said they confirmed it, U.K. had done the same but there still seemed to be some uncertainty.  I had 212 contracts at an average price of about 14 cents each. A few hours after the White House made its announcement today the contract was closed at $1, which means that my current cash level is NZ$212.09.  The nine cents was leftover from before.

This little experiment began April 12th, by the time you read this is will be June 14th.  I started with NZ$60 and now have NZ$212.09, a 253% increase. Free money.

For now my portfolio is empty.  At one point it contained over 300 of the Syrian contracts so that lesson on impatience has been learned.  Also, from now on if there are any purchases made, the update will be posted here within 24 hours.  It is possible that the next purchases may be on a different site but that decision has not yet been made.  iPredict seems fairly well organized so far, perhaps another few contracts before cashing out.

Finally, the hope is that the next purchase need not involve crimes against humanity.

 

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 Webernet.ca. If all goes according to plan the free money should be flowing in no time.