MTGO Finance for the Paper Financier: Speculation and Redemption

Tweet by SaffronOlive // Apr 08, 2015

finance

Lately on Twitter I've been posting Magic Online (also called MTGO or MODO) updates, sometimes about individual cards, but most often about set prices and redemption. Because Magic Online is a huge part of my Magic life, especially as far as actually playing Magic (I live in a rural area, so a huge percentage of my competitive play comes through Magic Online), I sometimes forget that there are many Magic players out there who do not use Magic Online at all. While there are several great resources out there for starting out on Magic Online — including a great video series by Richard found on the MTGGoldfish Youtube Channel — some of my Twitter peeps pointed out that there isn't much for the MTG finance people who do not play Magic Online but are intrigued by the financial potential of the program.

So today we are going to have a sort of MTG finance primer for Magic Online. While I will briefly run through the basic costs of the program, the bulk of our discussion will be about speculation and redemption — a mechanism built into the Magic Online economy that allows players to swap out a complete digital set of cards for a complete paper set. If you are interested in reading more about starting out on Magic Online as a player, Cardhoarder has a very good (and up to date) MTGO Beginner's Guide which I highly recommend checking out.

Creating an Account

Regardless of whether you are interested in Magic Online as a player or financier, you are going to need to create an account. This can be done through the Magic Online homepage. It's also a good site to check every few days because it is where weekly announcements, the bug blog, and upcoming promos and flashback drafts are posted. Starting a new account will cost you $10, but along with a user name, you get a few goodies to get you started. For your initial $10 investment you get:

Five Event Tickets: We'll discuss event tickets more in a moment, but their cash value is somewhere between $0.90 and $1.00.

20 New Player Tickets: These are basically worthless for financial purposes. They are non-tradable tickets that allow you to enter phantom (which means you don't keep the cards you open) "new player" draft and sealed queues which offer minimal payouts and are designed to let new players get their feet wet in a less-competitive environment).

5 Avatars: While some avatars are tradable, and a few have value, the avatars you get with your account are non-tradable and have no value.

650 commons/uncommons/basic lands: These are not random cards; instead they come from a preset list which updates annually (I believe). These cards have little or no value and are designed to allow players to build casual Standard decks.

Basically, you pay $10 to get an account and get $5 worth of event tickets. In other words, getting an account only costs $5 (this is a one-time fee). While some players have multiple accounts, unless you are playing Magic Online as a full-time job or want to have one account for play, one for storage, and one for speculation (or something like that), there really isn't any benefit to having more than one account.

Event Tickets

Event tickets (or "tix") are the currency that drives the Magic Online economy. Every ticket in circulation comes from the official Magic Online store (found in-game) at the cost of $1 plus applicable taxes (for me, in New York, one ticket costs $1.08 with tax). While the main purposes of tickets is allowing for entry into various events (for example, to play a draft you need either three booster packs and two tix or no boosters and 14 tix), tickets are also the most common way to acquire cards on Magic Online. While it is simplest to consider one event ticket equivalent to one dollar, for the MTG financier this isn't exactly true. While every ticket originates from the store, once they are in the wild, not only are they bought, sold and traded, but their market value changes slightly.

Other Ways of Buying & Selling Tickets

Let's say I am looking to buy 500 tix to put together a few complete sets for redemption. Option one would be to head to the store and buy the tix directly from Wizards. The problem with this method is that I end up paying $540 for $500 worth of tickets. Option two is to buy tickets from one of the big vendors, who typically sell tix for between $0.99 and $1.10 (the main benefit here is avoiding the tax charged by Magic Online). Option three is to find someone who is selling tix and buy from them. If you follow Magic Online players on Twitter, you'd be surprised how often you are able to pick up 500 tix for as low as $0.93 each by paying with Paypal Gift. Using this method brings the total cost of 500 tix of down from $540 to $465, and as you will see when we are talking about redemption, this $75 dollars makes a huge difference in whether or not redemption is profitable.

You can also sell tix for about $0.93 each (although prices sink as low as $0.90 or climb as high as $0.98 based on supply and demand), either to big "bots" (the Magic Online equivalent of vendors with Cardhoarder, MTGOTraders, and Goatbots being some of the most well know/respected), or on Twitter. While you generally need to be selling a decent number (in the hundreds) to find a buyer, the fact that you can turn tix into cash is especially important for speculators because it gives them a consistent way of cashing out for real money. Although increasing the number of tickets in your account is great, knowing that in the worst case you can always cash out for a 7 percent loss, makes investing significant money in the system much easier to justify.

Important Note: You will occasionally see offers to "buy 175 Event Tickets for $100" or other absurdly low prices either in the game itself, on Twitter, or other forums. Don't do it. Just don't. If the price per ticket is significantly lower than the market rate, something is wrong. Mostly likely the tickets were purchased with a stolen credit card or hacked Paypal account. If you purchase these tickets your account can be locked while you try to prove to Wizards that you were not involved in the crime. It's simply not worth the risk.

Spending your Tix

On Magic Online, trading between human players and trading cards for other cards is rare. While this does happen on occasion, a huge majority of buying and selling takes places between a human player and a bot — one of the many automated storefronts found in the "trade" tab in-game. I mentioned a few of the most trusted and well-known a moment ago, but there are literally hundreds of different bots on Magic Online.

Part of the reason there is little human to human trading on Magic Online is the Event Tickets themselves. While their basic value is $1, in an effort to appease various gambling laws, Wizards does not allow tix to be broken down into smaller increments. In essence, a ticket is a dollar bill in a world with no quarters, dimes, nickels, or pennies. For example, you are looking to buy a Polluted Delta which is valued at 4.65 tix. You find another player who is looking to sell the Polluted Delta they just opened in a draft. In the paper world, this would be an easy transaction, but on Magic Online it is nearly impossible to complete. Either the seller accepts 4 tix (less than what they could sell to a bot for), the buyer pays 5 tix (more than they could buy from a bot for) or you have to find additional cards to even out the deal (which isn't always an easy task). As a result, most people avoid this hassle altogether and just deal with bots.

So what makes bots so much better? Thanks to their automated nature, bots are programmed to store user credit down to the hundredth, or sometimes even thousandth of a ticket. So if you want to buy that Polluted Delta you give the bot 5 tix and it will save the 0.35 for next time. Beyond storing credit, the best bots have most (or all) the cards you could possibly want in stock, so you can put together your entire deck or set in one stop.

These same bots will also buy your cards, although many of the biggest bots don't list their buy prices, (a couple do).There is also MTGOLibrary which is sort of the TCGPlayer of Magic Online, which lists buy prices for many bots. Unfortunately, none of the biggest and most respected bots use the site. While some of the smaller or newer bots listed are fine, others come and go quickly or use the site to drive traffic to their bots (listing high buy prices but not actually buying the cards). If you dig through the list, you can find some good ones, but until you come up with a list of bots you trust and enjoy dealing with, take the results with a grain of salt.

Finance on Magic Online

So, you are a paper player who isn't especially interested in building a collection or playing Magic Online, but are interested in using it for Magic Online finance. Since you will be looking to cash out for real money, you basically have two options: speculation and redemption. Let's discuss each of these individually.

Speculation

For all intents and purposes, speculation works the same way in the digital world as it does in the paper world. You buy cards you expect to increase in price with the hopes of selling for a profit later. However, there are some key differences when dealing with digital cards.

Everything happens much faster on Magic Online. Prices update and fluctuate by the hour (and sometimes by the minute) on Magic Online. Because bots are automated, most are programmed to update their prices when a certain number of a card has been purchased, while others prohibit accounts from buying more than four copies of a card in a 24 hour period. In a more recent trend, bots have been making hot specs untradable, even though they are in stock and listed for sale. I first noticed this trying to buy Wild Defiance during PT Fate Reforged (which increased 2000 percent in a few hours), and more recently while trying to buy Thassa, God of the Sea in the minutes after Shorecrasher Elemental was spoiled. Basically, the Magic Online market is the paper card market on steroids.

These fast price changes can be both good and bad. While paper cards can take weeks to double in price, this commonly happens on Magic Online in days, if not hours. The big benefit here is you can cycle through specs much quicker on Magic Online than you can in paper. Without shipping and with instant transactions, you can invest in a card, sell it off, and invest in another card in minutes. On the other hand, prices decrease just as fast, so if you get stuck holding a day too long, your chances of finding that one buylist that hasn't updated their prices yet is slim to none.

The market on Magic Online is much more efficient. As a basic rule, assume the spread on rares and mythics is 10 percent. So if you buy a card for 1 ticket, you should be able to immediately sell it for 0.90 tickets. Because there are so many bots competing for your cards, you can almost always, for any non-bulk card, find someone who will pay you at least 90 percent of its retail value.

Credit management is an important skill. In the paper world you get to pay the exact price of the cards you buy. On Magic Online you round up to the nearest ticket, and your leftovers are saved for next time as credit. This has a strange effect where buying the cheapest copy of a card available isn't always the right move. For example, you could buy a Spell Snare from random bot X for 1.46 tix, or from Cardhoarder for 1.56 tix. If you will never use random bot X again, your 0.54 of credit will go to waste, effectively making the Spell Snare cost two tix. As a result, it is often better to have a list of bots you regularly use, because sooner of later you'll be back to take advantage of your credit.

While there are no shipping and handling fees on Magic Online, remember that if you are going to turn your tickets into cash, you'll still lose a percentage. As I mentioned before, you can generally sell tix for around $0.93 each. So you end up losing seven cents on every dollar you turn from tix to cash.

There are a lot more short-term spikes (and drops) on Magic Online. Courser of Kruphix is on the downswing heading towards rotation, but that doesn't mean that it can't have a good showing one weekend and increase a couple tix before continuing its decline. Since buy prices increase in tandem with sell prices, and the spread is always close to 10 percent, you can take advantage of small increases much easier than you can in the paper world, where an increase in sell price doesn't always equal a buy-price jump.

*Notice the difference between the online and paper price charts for Courser of Kruphix. Paper cards generally move (relatively) smoothly up and down in price (barring things like buyouts), while digital cards increase and decrease in small spikes constantly.

Other than the points above, Magic Online speculation and paper speculation basically work the same way. Cards that spike tournaments increase, cards heading into rotation decrease, etc. Reprints kill prices (maybe even more so than in paper), and anything and everything is likely to be reprinted in some way or another on Magic Online. Just in the past two years, Magic Online has seen the reprinting of Force of Will, all the dual lands, Wasteland, Show and Tell, Lion's Eye Diamond, Gaea's Cradle, and Entomb either in sets like Vintage Masters or as promos. Furthermore, unlike the paper world where the drafting of out-of-prints sets is rare, Magic Online regularly has Flashback Drafts for old sets, so even without reprinting, more copies of old cards enter the system on a regular basis.

What this means is holding cards for the long term is never safe on Magic Online. There is no reserved list to protect you and there are no "this card is too powerful for Standard" hedge. This is true of everything from Black Lotus to Path to Exile. As a result, you are looking to take advantage of short and mid-term windows, rather than hold cards for year-over-year growth.

Speculation Tips

Flashback Drafts immediately decrease the value of staples from the drafted set. However, most of the time these cards recover somewhere between one-two months for Modern cards and six-eight months for Legacy/Vintage cards. Let's use Modern Masters as an example. In December, we had two weeks of MMA flashbacks as part of the holiday celebration. The format is awesome (although expensive). Heading into these flashbacks, Path to Exile was worth 5 tix. There are a lot of players on Magic Online who don't care about constructed; they just want to play limited as much (and as cheaply) as possible. During the flashbacks, these limited-only players opened tons of Path to Exiles which they sold immediately to fund their next draft. This drove the price all the way down to 2.2 tix the second week in January (and you could actually buy for about 2 tix, since 2.2 was retail sell prices). Last week Path to Exile was all the way up to 7.3 tix, and you could sell them for around 6 tix each, a 4 tix gain (per copy) in less than three months. This is not an exception, this is the norm. As a speculator, Flashback Drafts are your best friend. Stick to the short- and mid-term. The long-term is just too uncertain. There is no opportunity in the casual market. Zip, zero, nil. Commander staples that are extremely expensive in the "real world" are worthless on Magic Online. So are cards used to build casual decks. If it isn't seeing play in a format where you can win packs (Standard, Legacy, Vintage, Pauper), it's generally worthless. I'm sure you've heard the rule of never cracking packs in paper Magic. It applies double on Magic Online. The value of a pack on Magic Online isn't so much the cards in the pack, but the fact that it allows you to enter a limited event. As such, pack EV is normally between 1 and 1.5 tix. At the same time, it is almost always better to buy packs from a bot rather than from a store. Right now, Khans of Tarkir boosters are worth somewhere around 1.5 tix, but the official store still sells them for $4 (actually, all packs are full retail price in the store, regardless of their value on the secondary market). Keep an eye on special sets. Sometimes when you are looking to turn some cash into tix, your best play is to buy Planechase or Commander decks from the store and sell the singles to bots. There was a time when Shardless Agent] was selling for 10 tix per copy and you could get two copies in a Planechase deck for $20 from the store. All together, you could sell the contents of the deck for nearly 30 tix. Even considering tax, this allowed me to buy tickets for around $0.78 each (including tax) and it only required minimal work.

Redemption

The second way to "cash out" from Magic Online is by redeeming complete sets. If you are a paper financier with no interest in Magic Online, this is — by far — the most important part of this article for you.

The idea of Magic Online, for better or worse, is to have a digital representation of the paper card game. Both packs and drafts cost the same amount on Magic Online as the do in paper (although on the average singles are less expensive). One of the ways Wizards tries to make players comfortable with paying so much to play with digital cards is by allowing them to turn their digital cards into "real" cards. The mechanism they use for this transfer is called redemption.

For Standard-legal (and recently Standard-legal) sets, you can collect a complete foil or non-foil set, pay a $25 fee (plus $3 shipping and handling here in the US), and Wizards will remove the digital cards from your Magic Online collection and send you a paper version of the same set. This happens once per week, during Wednesday downtime. Given that singles are generally less-expensive on Magic Online, you can often acquire sets through Magic Online for less than you would pay in the real world.

Set Prices MTGO to Paper

Set MTGO $ (including redemption fee) Paper Price (Ebay complete minus 15%) Fate Reforged $81.99 $106.25 Khans of Tarkir $93.99 $96.05 M15 $132.99 $152.10 Theros $108.99 $106.25 Born of Gods $66.49 $85 Journey into Nyx $113.99 $110.50 Return to Ravnica $91.49 $97.75 Gatecrash $78.49 $93.95 Dragon's Maze $49.49 $61.01

*These prices are assuming you buy a complete set from one of the major bots and sell the unopened complete set on eBay. You can likely build sets slightly cheaper by shopping around on Magic Online and sell them for slightly more if you get creative (perhaps redeeming x4 and selling play sets of rares and mythics plus x4 common/uncommon sets, or by finding local buyers to avoid the 15% fee). It's also worth noting that selling complete sets on eBay isn't all that easy; there are usually many listed and only a handful sold, so make sure to plan ahead before going too deep with redemption.

The other great thing about redemption is you don't actually have to sell all the cards. Instead, you can sell some of the cards, and keep a handful of cards that you want, often for a very good price.

So how do you go about building a complete set for redemption? For me, as someone who drafts quite often it is actually quite easy. I end up with complete (or nearly complete) sets almost by default from the cards I open. As a non-Magic Online player, you have two options: First, you can dig around from bot to bot, piecing together a set card by card. While using this method will get you the cheapest set possible (in theory), it is also very time consuming. When you consider the hidden cost of leaving credit with a bunch of different bots, it might actually be more expensive. The second method is the one I recommend for the non-player: find a reputable bot that sells complete sets (MTGOTraders, Cardhoarder, and GoatBots are all very good and respected in the community), and buy the entire set directly through their bots or websites. In some cases you can even pay directly from your paypal or credit card, eliminating the need to purchase tickets.

Redemption Tips and Tricks

I mentioned earlier that you pay $25 for each set you redeem, but you also pay for shipping. In the US, this fee is minimal ($2.99), but if you are having your set(s) shipped internationally, it can be quite expensive (I've heard up to $29.99). The good news is, unlike the redemption fee which applies to every set (if you redeem one set you pay $25, if you redeem four sets you pay $100, etc) you pay the same shipping no matter how many sets you redeem. If possible, try to redeem multiple sets together to maximize your shipping dollar (especially if you live outside the US). Another one of the cynical trends on Magic Online is when a new set releases, the prices of cards from other Standard-legal sets often take a temporary dive. I did some research on this for another article and found that a set release often causes a temporary 10 percent decrease in total set price because people sell off parts of their collection to pay for prerelease events. As a set redeemer, you can take advantage of this trend and lock in your set price at a discount. Pay attention to all the supply variables that impact paper Magic because they impact Magic Online as well. Take rotation for instance: Under the old rotation schedule, sets would often bottom out during the late spring/early summer before rotation, before peaking in late-fall or early winter. While I'm still unsure of the impact the new rotation schedule will have, if you time your redemption right you can buy low and sell high to maximize your profits. Pay attention to draft cycles. On Magic Online, the most recently released limited format is by far the most played, and since pretty much everyone knows not to open packs on Magic Online, limited is the primary (I'm tempted to say only) way cards enter the system. For example, with the release of Dragons of Tarkir, very few KTK cards will enter the system. Plus, the cards that are in the system will slowly be eaten away as people redeem sets. So set prices of KTK should be on the rise before too long, so you are probably best off building your KTK set soon if you are planning on doing it before the pre-rotation decline. Remember that you lock in your price when you buy the card. If you purchase a set of KTK today for 66 tix, you can let it sit in your account for months (even years) before redeeming it and your cost will still be 66 tix. If/when a KTK set costs 100 tix this fall, your price will still be 66 if you buy today. If you decide to compile the set by hand (rather than buying the entire thing from a bot), you can do the same thing for individual cards. Don't wait too long to redeem. Sets are guaranteed to be redeemable for their entire life in Standard, and then there is a cut-off date one year after the set rotates. In between you can generally redeem sets, but in theory, it is possible that they run out of sets somewhere between the guaranteed date and the cut-off date. Once redemption is over, it's over and set prices drop significantly. Currently, the oldest set you can redeem is Return to Ravnica, which should be available until November. You can find the full list of cut-off dates here. Only sets that go through Standard are redeemable. You can't redeem Modern Masters, a Commander deck, or any other supplemental product or special set. Redemption isn't available for the first month after a set releases. I don't know much about redeeming foil (or "premium") sets. The process is the same, but from the bit of research I've done, it seems like they are difficult to sell, and at least in the short term are less profitable. However, if you are going to redeem foil sets, you are usually best served purchasing the cards before redemption even starts. Once people start redeeming sets, mythic foils carry a huge premium, but you can often pick them up cheap from drafters during prerelease and release events. Check out the foil set price of KTK; it has nearly doubled since redemption started.

According to Wizard's official redemption policy page, it can take up to a month for your redemption request to be processed, shipped, and arrive at your home. In practice, at least in the US, the norm seems to be closer to a week or 10 days, so you should get your set relatively quickly. It will come in a plain white box, like the one pictured below.

Conclusion

Even if you have no interest in actually playing Magic Online, the program does offer some MTG finance opportunities. The major upsides are that the market is more efficient than the paper market, spreads are significantly lower, turn-around time is much faster, and with the help of redemption you can often acquire paper cards on the cheap. The most significant downsides are that the program can be cumbersome (although your computer has a lot to do with it; I used to dread trading until I upgraded my system) and there is an extra step in turning your speculations or redemptions into cash (either selling the tickets or the cards from the redeemed set).

For me, Magic Online is primarily a place that I can play competitive Magic at any hour of the night or day, but it's also a secondary part of my MTG finance plan. The extremely low price of buying bulk-level rares and mythics makes playing the "penny stock" game easy, and if you guess correctly, the rewards (percentage wise) are often much, much greater than in the paper world. Plus, you can buy 50 copies of Wild Defiance in a couple minutes and resell them almost as quickly. No shipping, no USPS hassles, no buyers claiming they didn't receive their cards or worrying about whether or not a card is mint, near mint, or played. Plus, there is only one "fee" (the 7(ish) percent loss that come from selling tickets for cash). Basically, Magic Online eliminates many of the headache-causing aspects of paper finance. I'm not suggesting that Magic Online can (or should) replace your paper finance habits, but for me it has a place in my total MTG finance portfolio.

As always, leave your thoughts, questions and opinions in the comments, or you can reach me on Twitter @SaffronOlive. If you do decide to take the plunge on MTGO and have more questions about anything (or have any problems getting started), I'm SaffronOlive in-game as well.