Gain an understanding of how new information is incorporated into futures market prices
Appreciate the instances in which information can (and cannot) be used to profit from futures market transactions
By participating in a futures market just for this class
Very short description
For the class paper you must
Submit a hard copy of the paper to the box labeled Norwoods Class Papers in AGH 419 AND an electronic copy to the dropbox component of D2L (also known as Online Classroom) by 5 PM on March 10. Students not making this deadline for both submission locations can still turn in their paper with a 15 point deduction, so long as both versions are submitted by 5 PM on March 20.
Buy and/or sell contracts in the class futures market with the objective of making money for
Mens basketball game versus Texas Tech, to be played on 1/21
Mens basketball game versus OU, to be played on 1/30
Mens basketball game versus OU, to be played on 2/18
Watch the movie Trading Places starring Dan Akyroyd and Eddie Murphy about trading futures markets in agriculture.
Write a paper describing
Your trading activities in the class futures market, including your trading strategies, what trades made you money, what lost you money, and how you performed overall.
How the basic plot in Trading Places, where two people made money in OJ futures by manipulating peoples beliefs, could have taken place in the class futures market. The plot climaxes in the scene shown below. What I want you to do is to describe how this scene could have taken place in our futures markets.
Trading basics
Most of the insruction you need on trading will be given in class, so class attendance is crucial for doing the class paper. The basics, however, are as follows.
Select your name and then request for your five digit password to be emailed to you. This is the password you will use both in the futures market and at other places in the class website, so always keep this password handy.
Use this password to log into the prediction market.
Study the guide at the website.
At the beginning of class we will practice trading in the Balls market.
Then we will trade for real regarding contracts for the Texas Tech 1/21, OU 1/30, and OU 2/18 mens basketball games.
Try to make as much money from buying and selling contracts.
You will not be graded just off the money you make, but your overall participation in the market as well as your description of your activities in the paper. Just makeing more money doesnt guarantee you a higher grade, nor does trading more contracts. I want to see that you took the trading seriously, and tried to make a number of smart trades.
Students should trade on all three contracts.
Formatting instructions
Single spaced
No less than 3 pages
Use Garamond, 12 point font
one–inch margins throughout
Use bold font for headings. Do not indent headings. Do not indent first paragraph after a heading but do indent all subsequent paragraphs. Leave one space between the last paragraph of the old section and the heading of a new section, but do not leave a space between a heading and the first paragraph of that heading.
Use justify alignment
Should include one attractive and clear bar graph depicting per contract profits for each of the three contracts. To a great extent, this graph should be able to stand alone, such that someone can understand what the graph communicates without having to read the text surrounding the graph. This graph should have a separate bar for each of the three contracts, along with a data label showing the average profits made from each contract.
Suggested organization
Introduction—describe the futures market we used in class and its similarities to the markets in Trading Places.
Trading strategies— Explain the strategies you used in determinine your predicted probability of OSU winning, and when to buy or sell contracts. This should include your information sources regarding the basketball games as well as how your strategy evolved over time (if it did).
Trading activities—detail the trades you made for each contract, describing why you bought or sold certain contracts and the outcome of some or all of the bets (depending on how many you made). Illustrate your overall performance trading with a bar graph. Describe how market prices changed over time for each contract, and why, and how those changes impacted your profits and your strategies.
Mimicking the plot—The movie Trading Places contains a plot where two individuals played by Eddie Murphy and Dan Aykroyd, manipulate information in the OJ futures market to profit by trading. Describe how a similar plot could have taken place in our futures markets in class. That is, describe what events might have taken place in our markets that would make it resemble the plot of Trading Places. Put another way, describe how you or a group of students could trick the rest of the class and profit from the ruse.
Parting thoughts—Conclude your paper by providing me your honest thoughts of the game, the movie, and my attempt to teach futures markets by combining the basketball game futures market with the movie.
Grading
I would never voluntarily assign a paper to such a large class because it is impossible or me to provide feedback. I am forced to assign a paper of this length because this is an S class. With so many papers to grade it will take me the rest of the semester to grade them all, so do not expect to have your paper grade before pre–finals weeek. When grading your papers I will be checking your paper content by comparing your stated profits and trading performance to your actual performance, evaluate whether you followed the instructions, and then I will listen to a computer read your paper (I have chronic pain where it hurts me to stand still or sit, so I grade papers by listening to audio versions of it while I walk) and assign an overall grade to the paper. Unfortunately I will not be able to describe exactly why I assigned a certain grade, but I will assign points according to the categories below.