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What is a fair bazaar value, really? if youre going to trade, be sure its worth it! - investing

 

I've been concerned in online trading, distinctively with stock and index options, for more than a few years. In this time, I've spent a great deal of time belief about value and the fact that anything, be it a stock or currency or even a house, is worth faithfully anything a big shot else will pay for it. Sure, there are a million and one pricing models (especially in economic markets) that will tell you correctly what amazing must be worth. But in the final analysis, if insignificant person will pay that much, then it's not in reality worth that price.

Let's illustrate this belief in a very clear-cut fashion. I'm an American so I'll use U. S. currency to make my point.

What is a $20 bill worth? Lacking over accepted wisdom it and discussion about inflation, exchange rates, etc. let's just say that it is commonly said to be worth $20.

Would you pay me $20 for a $20 bill? I'm going to guess in all probability not, as there would be no real argue to do so. You would have to go to the attention of getting me your $20 and I would have to go to the bother of charitable you my $20 bill, and neither of us would be in a beat arrangement than we were before. Therefore, I would like to award the idea that a $20 bill is not in point of fact worth $20 since no one would possible pay $20 for it!

So how much would you pay for a $20 bill? Would you pay $19. 99? Is it worth the crack for 1 cent? No? How about $19. 50? $19? Shall I keep going?

In a free and fair marketplace it is the advertise itself which determines value, and given a large adequate market, that value be supposed to be equitably accurate. I read an article online some time ago about a big cheese who absolute to conduct an conduct test just for fun. He put a new $5 bill up for dutch auction online and began the biding at 1 cent. He crafted a creative class of the note, and waited to see the results. When it was all said and done, the bill did in fact sell - for slightly over $3. He then spoke with the attractive bidder, who said he had made a profit many times online by purchasing currency for less than face value (including a $20 bill for less than $10 as I recall).

The conductor of the experimentation left it at that - naught more than a to some extent humorous exploration into what ancestors think a little is worth. But to me this meant so much more.

A money is not in reality worth a dollar. . . so what is it worth? What would you trade for $1? For $20? For $100? $1,000? And if a cash isn't actually worth a dollar, is a share of stock worth $50, or in fact something at all?

The come back with is yes. At any given jiffy it is worth accurately what a celebrity is willing to pay for it. No more, no less. Money and value are simply ideas, they are not absolutes.

Consider this cautiously the next time you are converted that the stock, option, currency, house, or something else you want to buy, is worth what you're about to pay.

Jonathan van Clute is a full time investor, educator, speaker, and online options and sports arbitrage trader. In addendum to his affair activities, he is also a musician, video editor/animator, and one of the world's best Segway Polo athletes. He can be reached via email at jonathan@PMLinvestments. com and is dialogue at an future teleseminar, visit http://www. snurl. com/vcfmv for details.


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