Flipping Sneakers
- Thread starter BMK
- Start date
Well, he was selling sneakers he did not own...
betting that he could buy them at a lower price before he had to actually deliver.
The article does compare it to an "option bet" for the buyer. And perhaps that is one way of looking at it, at least from the buyer's perspective. But it was really more like a futures contract.
The buyer did not have the right to cancel the purchase. And the seller was contractually obligated to deliver, at a certain price, by a certain date. He failed to deliver, of course. And in some cases he bought back the contract at a higher price. But when he bought it back, or "refunded" the purchase, it was often not in cash, but in the form of a gift card that turned out to be worthless because he was insolvent...
Almost like a Treasury Bill: buy it at a discount, and in six months it matures into the full value... although you must agree that there's a bit more risk involved here!
Yeah I agree that it was closest to a future, except they weren't buying a contract, they were actually paying a discounted price. The article is wrong... he wasn't selling options, because the buyers weren't paying a premium for the option to buy the shoe at a price; they had no _option_ to let it expire if the price dropped. Also he wasn't selling short because he wasn't sourcing, borrowing, selling, and then covering.
The Ponzi enters when he started taking losses. His pricing was inaccurate, and he started using incoming cash from new buyers to fund delivery of "contracts" on the sneakers.
Crazy! I wonder if we'll see surge of sneakers on Ebay!
Last edited:
Shorting 30% of the float never a great idea. Here’s a link to the same story.
https://archive.ph/sbz5S
https://archive.ph/sbz5S