Thread by @FabiusMercurius

👟How to side-hustle $10k+ a month👟

A friend of mine has zero finance background, never reads Buffett and makes 40% returns trading.

How?
He trades sneakers.

Turns out sneaker-flipping shares a lot in common with value, macro, & algo trading.
Plus there's more alpha.
🧵👇

1/ Market Overview

$2Bn was the size of the US sneaker aftermarket in 2019.
$30Bn is how big it will be in 2030.
Today 4% of all sneakers at release get purchased for immediate resale.

Why does this aftermarket opportunity exist? Why doesn't Nike/Adidas just capture the alpha?

Nike/Adidas are playing the Ferrari game: i.e. release a very limited supply to appeal to exclusivity & watch as the people bid up their kidneys.

Because of such tight finite supply, sneakerheads are the only remaining sellers after the initial drop & they get to set the market.

2/ Who should trade?

If ur managing a portfolio >$50 mil, you're probably overcapitalized to seriously trade this asset class.
The highest ticket trades can go up to $100k (for a pair of Air Jordans) but average transaction sizes hover around $1200.

Everyone else is fair game.

3/ Why trade sneakers?
(Why trade NFTs?)

1) earn illiquidity premiums (illiquidity means more mispricings, which means more arbitrage opportunity)
2) diversify from stocks
3) play where the most sophisticated hedge funds are blocked out (due to overcapitalization)
4) it's fun 😃

3/ How sneaker-flipping is like macro trading.

Hypebeast.com and Highsnobiety.com are the JPow and Yellen of sneakerworld, respectively.

Like macro traders, sneakerheads need to master the art of sentiment-reading, predict herd momentum, & model supply-demand.

4/ How sneaker-flipping is like fundamental investing.

The sneaker market is naturally event-driven. Releases are like IPOs. A hedge fund trader tracks catalysts; a sneakerhead tracks drop dates. Global traders in both markets need to wake up at 3am sometimes to catch the open.

Plus, both rely on "public comps"/ precedent transactions to set price targets (i.e. they model upcoming releases after similar ones in the past).

Both markets like to pretend that intrinsic valuation matters (but everyone knows a Yeezy doesn't go for $2k because of its rubber).

5/ How sneaker-flipping is like high frequency trading.

Neanderthals learn the hard way: they excitedly log into Nike at 11:59am, hit refresh 5x, click "BUY" ASAP... and burst into tears when they see "SOLD OUT!"
Nooo! 😭😭

Then they learn to set up a distributed botnet in AWS.

There's 2 reasons u need a distributed cluster to nab sneaker IPOs effectively.
1. speed, duh
2. order limits of size 1 (if u want 7 pairs of off-whites there's no chance u can log into 7 incognito browsers under 7 different accounts, push "BUY" & enter ur credit card info...)

5/ Alpha comes from informational edge.

Some sites like AIO Bot say they can help u cop dozens of Yeezys at retail price for just $325 lifetime access!

🤔 Now why would a tool that helps you buy @ $900, sell @ $1200 fifty times a month ($180k /year) go for only $325??

Data!

You give them intel, while AIO Bot gives u pipes.
You outsource devops to AIO; AIO outsources time-consuming due diligence that only a human can do to you!

(Ur intel gives them an unfair advantage to model real-time demand, which boosts their own internal principal trading.)

If you enjoyed this thread, maybe you'd like my other pieces as well!

I like to write about:
- niche corners of the market that feel under-tapped
- cool trading strategies to resurface from the past
- bizarre accounting tricks

Check it out here 👇

https://twitter.com/FabiusMercurius/status/1416550699173773314