Cat, find your way out of this thread since you werent here 3 years ago when we started it
IS THIS feasible?
- Thread starter systematictrader
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Cat, find your way out of this thread since you werent here 3 years ago when we started it
Great info, through out the last 3 years this has gone more on the back burner Bone, the main difficulties that came up was the legality issues, many big law firms asked for an insane amount of money JUST TO FIND OUT what regulations this is to be under, some were like its as simple as phone card where people prepay and use later, no tough regulations needed, second was like this is more like investments and needs such regulations because peoples monies on the back end are sitting in speculative derivatives, third was more like its a like a bank people deposit money with you and redeem it via gallons. The amounts of money they asked for was again ONLY to find out which, let aside regulate it or get the part done. On hold now, things are slow, but not dead, hopefully can be relaunched in the future with more ample resources and contacts who can resolve such issues as compared with the many investors who simply offered money but no human capital at all
This part is a REAL unresolvable problem: (from your website) “Once you purchase your gallons, you can use them anywhere*, anytime without having to worry about gas prices again. The GALLON CARD has no limits, no expiration, use them when you want, as you want.“
There is NO such thing as a universal “spot” gasoline motor fuel price in the United States. Far from it in fact. So the promise of locking in prices ‘anywhere, anytime’ is pure fiction.
Gasoline blends (and therefore availability and price) are highly regional and vary greatly. Midwest and NorthEast States have Winter and Summer blends. California has its own unique mandated oxygenated blend - and there are no refineries in the State. California gasoline prices are notoriously volatile and are considerably more expensive than other States. Some States mandate more Ethanol content than other States.
‘No limits and no expiration’ for individual retail customers would transfer insane levels of unbounded risk to the Card Issuer. It would also be impossible to sufficiently hedge.
Dynamically hedging the Jet Fuel portfolio for an Airline is a formidable challenge.
The reason that most Airlines don’t hedge is because it takes a serious capital commitment beyond forecasted fuel expense in order to posts the margin in order to buy OTC Jet Fuel Swaps. Even when Natural Gas was somewhat volatile a few decades ago most Commercials didn’t hedge because it takes a shit ton of dedicated (Stranded) capital to buy and then hold and then roll 2,000 HHNG Futures Contracts. And then to post additional margin on very short notice.
Point being - your idea is novel but the practicality is shite. If, for example, one million customers prepay $200M for 100 million gallons of gasoline - it will take considerably more than $200M for you to buy the analog derivatives hedge. (you can’t hedge your particular business model with spot physical purchases) And of course that’s completely ignoring the impossibility of sufficiently hedging such a disparate segmented portfolio to begin with.
I wish you good fortune !
There is NO such thing as a universal “spot” gasoline motor fuel price in the United States. Far from it in fact. So the promise of locking in prices ‘anywhere, anytime’ is pure fiction.
Gasoline blends (and therefore availability and price) are highly regional and vary greatly. Midwest and NorthEast States have Winter and Summer blends. California has its own unique mandated oxygenated blend - and there are no refineries in the State. California gasoline prices are notoriously volatile and are considerably more expensive than other States. Some States mandate more Ethanol content than other States.
‘No limits and no expiration’ for individual retail customers would transfer insane levels of unbounded risk to the Card Issuer. It would also be impossible to sufficiently hedge.
Dynamically hedging the Jet Fuel portfolio for an Airline is a formidable challenge.
The reason that most Airlines don’t hedge is because it takes a serious capital commitment beyond forecasted fuel expense in order to posts the margin in order to buy OTC Jet Fuel Swaps. Even when Natural Gas was somewhat volatile a few decades ago most Commercials didn’t hedge because it takes a shit ton of dedicated (Stranded) capital to buy and then hold and then roll 2,000 HHNG Futures Contracts. And then to post additional margin on very short notice.
Point being - your idea is novel but the practicality is shite. If, for example, one million customers prepay $200M for 100 million gallons of gasoline - it will take considerably more than $200M for you to buy the analog derivatives hedge. (you can’t hedge your particular business model with spot physical purchases) And of course that’s completely ignoring the impossibility of sufficiently hedging such a disparate segmented portfolio to begin with.
I wish you good fortune !
Read the prior posts because all this has been answered long time ago, if you have 200 million it takes more than that to hedge? what are you talking about, have you traded, have you heard of establishing a physical position with a brokerage, some people here truly dazzle how much they know and how little they apply it takes 10% to hedge that amount, read the prior post for your other comments, they all been answered
Yes, I have extensive experience trading OTC physical, OTC bilateral, and financially cleared Swaps in the energy markets. Electricity, Natural Gas, and Distillates.
You cannot establish a physical position with a broker using your business model.
You cannot establish a physical position with a broker using your business model.
OP has his mind made up, he is not in a listen or seeking advice mode.
It has been 4 years and still no traction as a business. If I were him I want some honest critics of my business plan/model.
A physical is not needed but to hedge 200 million where are you getting that you need MORE ?
ADvise welcome, cursing or reducling isn't
Look, I truly appreciate your creativity, and I’ve carefully read through your website and this thread in it’s entirety.
The most pertinent and unresolved questions are: you’ve promised, let’s say one million customers “locked in prices” at thousands of different price points - where are you going to come up with the capital for additional margin calls when the price goes down on those long contracts? How are you going to account for the discrepancies between customer “locked in” prices and the lag time price changes between being able to accumulate enough customer volume in order to buy a futures contract at 42K gallons notional? Where are you going to come up with the capital to cover the hedge contract rolling slippage costs?
The answer is: you can’t without adding a margin to your “spot” pricing - which defeats the purpose.
As a side note Customer purchases do NOT count as physical inventory unless you’re actually buying finished distillate with those cash receipts and storing it - which again defeats the purpose of your business model.
The most pertinent and unresolved questions are: you’ve promised, let’s say one million customers “locked in prices” at thousands of different price points - where are you going to come up with the capital for additional margin calls when the price goes down on those long contracts? How are you going to account for the discrepancies between customer “locked in” prices and the lag time price changes between being able to accumulate enough customer volume in order to buy a futures contract at 42K gallons notional? Where are you going to come up with the capital to cover the hedge contract rolling slippage costs?
The answer is: you can’t without adding a margin to your “spot” pricing - which defeats the purpose.
As a side note Customer purchases do NOT count as physical inventory unless you’re actually buying finished distillate with those cash receipts and storing it - which again defeats the purpose of your business model.
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I came across your posts while doing research on the feasibility of an idea I had last week for a card/service that enables drivers to pre-pay for gallons of gas and then later redeem those gallons at any point in the future.
Although you surely beat me to the idea, I would love to have the opportunity to chat and see if there might be an opportunity for us to collaborate.
I really like your approach to validating the market by initially trying to disprove it rather than prove it or make it work.
I’m not sure if you are still having trouble finding co-founders (given that your post was from 2017), but I can completely empathize with you on the co-founder dilemma you were running into. I went through the same co-founder fit struggles with a startup that I co-founded (fish and shrimp farming software platform… yes very random haha) which we recently decided not to continue moving forward with after working on our hardware/software engineering for 2 years.
One of the biggest lessons I learned was how critical it is to find motivated co-founders that have grit and share the same hard working mindset when it comes to putting in the long hours needed to pull things off and move fast.
I’m new to Elite Trader (I joined specifically because of this thread that you created). I tried viewing your profile to send you a direct message but was restricted from viewing your profile. Would you be open to having a call this week? If privacy is a concern, maybe we could use Google Voice phone numbers to preserve anonymity? I’d be down either way... we can have an anonymous call or share our identities… whatever you’re most comfortable with.
Can you DM me?