Every year economists cringe at the “deadweight loss” of Christmas gifts — the monetary loss that comes from spending more on presents than people value them. And the level of deadweight loss can be horrifying for Halloween trick-or-treaters. Nerds given to chocolate lovers. And saltwater taffy just thrown in the trash. But a solution has arisen from the hallways of NYC public schools.
The youth of New York recognized the importance of a robust secondary market for Halloween candy. Markets began to formalize a decade ago, following one Brooklyn classroom’s trading flows making national news. Soon after, the New York Candy Exchange (NYCE), located in Tribeca, opened its hallways for trading. For the last five years we’ve seen heavy trading the day after Halloween, tapering off into the second week of November.
While this year has made in-person trading difficult, hall monitor Sally McCoy of P.S. 32 remains optimistic. “We’ve seen extensive preparation in primary markets to ensure continued candy supply. With this encouragement, secondary markets are displaying a real appetite to continue trading.” To reduce in-person exposure, both the NYCE and the Chicago Candy Exchange (CCE) unveiled new digital exchanges, which debuted for initial futures trading last week. Savvy children have started creating options markets for candy that doesn’t exist yet.
In one-week options with November 1 maturities, Snickers is the clear Halloween favorite. But not everyone is sweet on this option. We spoke to Johnny “Mars-slayer” Malone of P.S. 46, who had decided to short Snickers this year. “Normally I do a straddle trade, going long on full-sized Snickers and short on minis. But this year, I think it’s a bubble. The writing is on the wall.” Yes, Johnny read the notices on the lunchroom wall about peanut safety.
With potential peanut regulations looming on the horizon from the New York Board of Education, Johnny feels confident in his position.
We reached out to Mars Inc. for comment on peanut regulation, and the Investor Relations Officer had this to say: “Everyone cares about the safety of children, but what we need is smart regulation… We recognize the frothiness of the market in these turbulent times, but this spike is supported by strong nougat fundamentals.”
But the market can stay irrational longer than Johnny can stay solvent. Fortunate for Johnny, he’s successfully negotiated favorable margin limits with Mrs. Malone, on the agreement that Johnny maintains his allowance reserves at 200% of his original trade. Johnny sealed the deal with a clause allowing Mrs. Malone to keep 10% of all discounted primary market purchases made on November 1st.
MBA in the City 