iPredict

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Frequently Asked Questions

Welcome to iPredict

Fees on iPredict

Short Selling

Other Questions

 

Welcome to iPredict

What is iPredict?

iPredict is New Zealand’s first prediction market. It is a simple securities exchange where you can buy and sell special ‘stocks’. The stocks are special in that they pay a dollar each if and only if an event comes true. In this case, the price these stocks trade for is the prediction. For example, you can buy stocks that pay a dollar if and only if John Key is the Prime Minister after the next election, and nothing otherwise. If that stock trades for 60 cents, then the market’s prediction is for a 60% chance of a National victory.

Trading on iPredict is easy. Just open an account with us (its free!), credit your account with your credit card or by a deposit into our bank account, and start trading. There are two ways to make money:

  • by buying low and selling high, just like real stocks, or
  • buy and hold and wait to see if you’ve backed a winner. If you have, you’ll get a dollar for each stock you hold.

So click here to log in and get started.

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I’ve just bought my first stocks on iPredict. How do I sell them?

Hit the trade button for the stock on your portfolio page, and then you have three options:

  • in the Simple trading interface, that asks "is this event more likely thanÂ…" answer the question "No"; or
  • hit the Standard link in the top left corner of your screen, then you'll see an option to sell. This option means you immediately sell your stock to the highest priced offers to buy; or
  • hit the Advanced link in the top left corner of your screen, then you'll see an option to sell. This option lets you name the price you wish to sell for, rather than accept the best offers to buy that are in the order book already. If you set a sell price that cannot be immediately matched with one or more offers to buy, then your sell offer will go into the order book and stay there until someone offers to buy from you (or you cancel the offer). This is called an Active Order and you pay no trading fees on those.

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How can I sell stock I don’t own?

You can sell stock even when you don’t own any. You do this if you think the a stock is overvalued. When you sell stock you don’t own, you are short selling.

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I signed up but haven’t received any email to activate my account. What should I do?

Drop us a line at the Contact Us page - we’ll see if we can find you and re-send the activation. Tell us the email address you used to sign up.

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Fees on iPredict

What are fees on iPredict?

  • Trading Fee 0.50 cents per share traded (buy, sell, short, cover), subject to:
    • Trading Fee is capped at 5% of transaction value (i.e. the amount of cash that moves into or out of your account for that transaction);
    • Trading Fee maximum $5/month per user;
    • No Trading Fee on Active Orders, bundles or closed contract payouts
  • 1.75% Credit Card Fee; there is no charge for manual deposits
  • A Withdrawal Fee of 4% of the withdrawal amount, $2 minimum, only traders with positive lifetime account earnings pay this fee on withdrawal
  • No monthly account fee. No sign up fee.

You’ll pay no fees for leaving an account open but unused with iPredict.

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When did trading fees start?

Trading fees launched in August 2011.

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Can I close my account?

Yes. Once you have closed out all your iPredict stock positions and withdrawn cash from your iPredict account, you can close your account by going to your Portfolio page, clicking My Account and then Close Account.

Why the change?

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To put iPredict on a more commercial footing, and to encourage more serious trading on iPredict. iPredict is pairing new fees with the introduction of new features designed to support traders taking larger positions in contracts.

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Short Selling

What is short selling?

Short selling simply means you are borrowing stocks to sell today, and promise to pay for them at some future date at the price that will then be prevailing.

You are, in effect, betting that the price of the stock is going to go down. You borrow stock and sell it at today’s price, and pay for the borrowed stock at a (hopefully lower) price in the future. When you do pay for the stock, that is called covering.

iPredict handles this transaction seamlessly. Simply tell iPredict you want to sell a stock when you think it is overpriced. If you need to short sell, iPredict will handle all the calculations behind the scenes, leaving you to concentrate on spotting profit opportunities.

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Why does it cost me money when I short sell? Shouldn’t I make money immediately and only pay later?

Good question. Our system requires that a short seller cover the worst case scenario up front, rather than cover later. On a binary stock (that is, a stock that pays either $0 or $1), the worst case scenario for a short seller is that the stock pays $1 (short sellers lose money if the price is higher than when they go short).

So a short seller pays that $1 when they do the short. When the stock closes, the short seller is paid the difference between $1 (what they paid already) and the closing price of the stock.

For example, consider a stock that is trading for 60 cents. A trader decides to short sell 100 stocks. The trader sells 100 stock ,and two things immediately happen.

  • the trader borrows 100 from the clearing house and pays $1 per stock; and
  • the trader sells the and receives 60 cents for them.

In net, the trader has paid 40 cents per stock ($1 - $0.60).

Now the stock closes. Let’s say the event did not happen and its closing price is $0. The short seller makes money because the price for the stock went down from the price when he borrowed them. The clearing house pays the trader the difference between the closing price and the $1 payment he made when he borrowed the . That difference is $1 minus the closing price ($0) = $1.

So overall the trader in this case makes 60 cents per stock - which is the difference in market price between when he shorted ($0.60) and when the market closed ($0).

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Other Questions

The Average Cost for a stock on my Portfolio page is less than $0 or more than $1, or much different to what I paid. Why is this?

This comes about because of the way average cost is calculated. The formula for average cost per share held is: (cash out - cash in)/shares currently held

Cash out occurs when you buy or short a contract. Cash in occurs when you sell or cover a contract.

If you just buy or short a share and then hold it, average cost will coincide with what you paid for it.

However, if you buy, then sell, and then buy some more, and the price of the share moves substantially up or down in the interim, then the average cost as calculated can move away from the prices you bought or sold at.

For example, consider a stock you spend $10 on at 10 cents to get 100 shares. Then the stock price goes up to 20 cents, and you sell 90 shares at 20 cents, receiving $18, leaving 10 shares in your Portfolio. What is the reported average cost of the remaining 10 shares in your Portfolio? Cash Out (money spent on these shares) is $10. Cash In (money received from their sale) is $18. So average cost of the remaining 10 is: ($10 - $18)/10 = -$0.80 per share.

The result here can be unintuitive. A rule of thumb is that is the average cost is negative, then the stock has been very good for you, and any cash realised from it at this point is 'gravy'. If the stock price exceeds $1 then it has been costly for you.

It is also worth noting: when you close out your position, this calculation does not reset - the average cost reflects your entire trading history on that contract.

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How do stocks that pay out on things like vote share work?

Some of our stocks a Indexed. Instead of paying $1 if an event comes true, and $0 otherwise, Indexed stocks pay out an amount between $0 and $1 that depends on some variable, such as share of the vote in an election. For example, our stocks VOTE.LABOUR and VOTE.NATIONAL each pay out 1 cent for each one percent of the vote received by those parties respectively. If Labour wins 45.5% of the vote at the election, for instance, that stock’s payout will be exactly 45.5 cents per stock.

Whereas Binary stocks only pay either $0 or $1, and Indexed stock will generally pay out something between $0 and $1.

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Do I get stock certificates?

No. Your stocks are listed in the My Portfolio page (you must be logged in). Please see our Terms and Conditions which set out your rights when holding these securities.

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What about manipulation?

From time to time, prediction markets are the target of manipulators. Without exception, manipulation is short lived and by definition presents opportunities for non-manipulators to make profits. Academic literature shows that manipulation actually increases the accuracy of the prediction market by raising its liquidity: traders are attracted into the market by the opportunity for profits that manipulation provides. When the manipulation ends, prices immediately return to a level that reflect fundamentals. The additional traders attracted into the market by the opportunity for profit increases the likelihood that the post-manipulation price correctly reflects market fundamentals.

In any case we don’t anticipate any major problems with manipulation because users are only allowed to trade relatively small amounts of money.

For more information about manipulation attempts, see our blog on the subject.

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Is insider trading illegal or against the rules?

No. In fact we welcome anyone and everyone who has (or thinks they have) information that can move the market price in the right direction.

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How much can I credit to my account?

The maximum limit on credit to an account is $2500 per 6 months, subject to a lifetime net contribution limit (defined as funds in minus funds out) of $10,000 in total. However, there is no limit on the size of your account balance on iPredict. What you earn on iPredict is yours.

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How do I withdraw money from my account?

Log in, go to the My Account page, and click Withdraw Cash.

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What fees are there?

Users who have earned money on their accounts - where a ‘net earner’ is defined as a user who has a net worth exceeding their net cash deposits - will incur a $2 or 4% fee (whichever is greater) when they withdraw funds.

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What is a limit order?

A limit order is an order to buy a security at no more (or sell at no less) than a specific price (hence the term, ‘limit’).

When you buy or sell , the exchange tries to match you immediately with a seller or a buyer on the other side. However, it cannot always do so, and your buy or sell order will not be filled immediately and will sit in our order book waiting for someone will to trade with you to come along.

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How do I cancel my limit order?

Log in and click My Portfolio, then click My Limit Orders. Click one or more Delete checkboxes, and then click Cancel Order(s).

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I just tried to purchase some stocks but they do not appear in my portfolio. What’s going on?

This means your order was not immediately filled and the exchange has left your order on the book while a buyer or seller decides to trade with you.

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I want to cover my short on stocks now. How do I do this?

By buying the stocks you need on the open market to cover your short position.

Let’s say you have shorted 100 at 40 cents. The price is now 30 cents (meaning you have made a profit of 10 cents per stock) but now you fear the price is about to go up and eliminate your earnings and you want to cover your short position.

To do this, buy 100 . The market will quote you a price. If you confirm it, then a) you pay the seller of the the price they asked for them; then b) you (automatically) give the you borrowed for the short back to the clearing house, which pays you the difference between the $1 you paid for them up front and the current market price for them.

If this sounds complicated, its not. You simply need to buy the required to offset your short position. The iPredict system handles the rest.

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I have forgotten my username and password. How do I get it back?

Go to the forgot password page to receive an email with your login details.

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I am having trouble trading. What should I do?

Drop us a line at the Contact Us page - we should be back in touch quickly to get you sorted. Also, if you’re running multiple browsers, we find that can sometimes have odd effects. Try restarting your browser.

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I can’t add money to the site. What’s wrong?

Drop us a line at the Contact Us page to report a problem - we want to hear from you so we can get this fixed asap. If you’re running multiple browsers, try restarting your browser.

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I have an idea for a stock you should run. What should I do?

Post your idea on our forums! Our New Stock Ideas forum is set aside just for this.

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I have an idea for a new site feature. What should I do?

Post your idea on our forums! Our Feature Requests forum is all ready for your idea.

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Oh no, I just short sold some stocks I meant to buy. How do I get out of this?

You need to buy the number of stocks you just short sold. If you are 10 short on a stock, you need to buy 10 stocks to get back to even. Your cash balance will just about get back to where you started. Short selling, although its actually easy to do on iPredict, can be confusing. Click here to learn more about short selling.

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How do I cancel my account?

We don’t have a way to do that. If you’re desperate to close out your account we can "suspend" your account which will prevent any trading on it.

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I don’t understand how a stock works. What should I do?

No problem, we’re more than happy to help. Send us a question via the Contact Us page and we’ll be in touch shortly.

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Can you increase the $2,500 limit?

The Financial Markets Authority has amended its iPredict authorisation to allow $2,500 to be deposited by each user every 6 months, subject to a lifetime net contribution limit (defined as funds in minus funds out) of $10,000 in total.

Note that the limit is staggered in line with your deposits. If you added $100 in your first month with iPredict, then another $2400 some time later, you’ll be able to add $100 on the six month anniversary of that first deposit.

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Is the cash six month limit a gross or a net limit?

Gross. That’s in the wording of our Financial Markets Authority authorisation.

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There’s a stock that’s open but should be closed. Did you forget?

Oops, quite possibly. Send us a message via the Contact Us page, we’ll get it sorted.

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I have put some money in my account using my credit card. When will it show up?

Immediately. If its not there, then either the transaction failed (you would have seen a big red message - hard to forget), or you probably didn’t complete the process. Check your Account History page. Do you see a recent credit card transaction there? If not, you didn’t finish the process. If you do see a successful credit there, contact us and we’ll look into it.

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Can I change the Trading Name on my account?

No, that’s fixed.

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Is iPredict being run as a profit-making business or more as an academic exercise?

Our goal is research and we provide (anonymous) data on a research basis (contact us if you’d like this). That said, we’re also aiming to recover the substantial investment made by our shareholders.

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Are traders’ money at risk of being lost if the company goes under?

Traders’ funds are held on trust, in a trust account, by the Clearing House (iPredict subsidiary Predictions Clearing Limited). Funds in that account do not belong to us. The Clearing House maintains a Ledger for each trader showing that trader’s entitlement to funds in the trust account. Funds may only be debited from that account or from a trader’s Ledger in accordance with our terms of service. Although the Clearing House is entitled to pay some funds to iPredict Limited (in particular, interest accrued on funds in the trust account), in general it is not permitted to do so. For more detail see, in particular, section 6 of our Terms of Service.

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