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Newbie here. Took the tour, and "financial engineering" was listed as viable questions, so I give this a shot despite being very basic. Please redirect me if there is a more suitable SE site for it.

I'm looking for a good search term for what a limited "trade space" is called in economic terms and the theory around its management.

Some examples:

  • A car dealership will have a limited number of spaces available for cars, new and old, and may face the situation of having to sell one at a loss to be able to trade and make money on future purchases and sales as opposed to keep it.
  • Oil storage. Your tanks will be of finite space, so even if they are filled to the brim and the market goes down, you may not be able to wait forever, sell at a loss to free up your "trade space."
  • Any warehouse inventory. Products which does not sell well end up taking valuable space and retailers end up selling items at a loss to free up "trade space."

Financial-example:

  • Stocks. You may be forced to sell shares in one of your existing investments at a loss to be able to free up "trade space" if there is a better opportunity out there of which you want to take advantage.

Is there a term for what I'm looking for other than "trade space"?

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  • $\begingroup$ I think your non-example can be thought of as an example, as well. If your capital is maxed out, i.e., you are at capacity, you may be 'forced' to sell shares in one of your existing investments at a loss to be able to free up 'trade space' if there is a better opportunity out there of which you want to take advantage. $\endgroup$ – amdopt Oct 18 at 14:16
  • $\begingroup$ @amdopt Yes, that could work too! $\endgroup$ – winny Oct 18 at 14:24
  • $\begingroup$ Is it simply "capacity"? Storage capacity, loss-absorbing capacity (aka capital), warehouse capacity, etc. $\endgroup$ – Alex C Oct 18 at 16:47
  • $\begingroup$ @AlexC Related, but not really. The time needed to empty an oil storage from your decision to sell until you can trade again needs to be taken into consideration. $\endgroup$ – winny Oct 23 at 13:50
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While I'm sure there are applicable theories and optimization techniques out there about your other bullets--i.e., searching for 'warehouse space optimization' will undoubtedly yield many results, my answer is only speaking to your last bullet about stocks in a portfolio.

For that example, I think some terms you may want to look into are Portfolio Optimization, Modern Portfolio Theory, and Portfolio Rebalancing.

If you were an investor and you always wanted to be fully invested (zero excess capacity - or 'trade space' from your OP) in a portfolio of risky assets, how do you select the assets and weight them such that the weight of each asset produces a return that (hopefully) aligns with your long term objective? What happens if you want to sell one asset due to poor performance and replace it with another asset?

The three links above are just a starting point for you to be able to understand the theory behind answering those questions. There is a myriad of mean-variance portfolio optimization examples and portfolio rebalancing examples as well as implementations of them in pretty much every language available via a simple search of the internet for either term.

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  • $\begingroup$ Thanks for your answer. 'warehouse space optimization' is related, but the oil storage is even better of an example since the market price goes up and down and it takes time to load and unload your storage, so you need to make a very informed decision when to buy and sell depending on past, present and estimated future price. $\endgroup$ – winny Oct 21 at 8:45

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