Bitcoin Forum

With bitcoinica down, what options do speculators have for leveraging?

I can't actually think of any, which means it's back to the pre-bitcoinica days, with just a pure trading market. If I'm mistaken and there are indeed other leverage options around, I would be interested to know the other services offering longs/shorts.

Sure, Bitcoinica will be back online again in the near future. But in the meantime, without the 'stabilising effects' of bitcoinica that was often touted, what's the most likely thing to happen with the market?

Loans

a fulcrum

This is probably your best choice.

<GASP> Speculating without leverage!!!  </GASP>

If I recall, there was a significant gasp around this time last year because there was... no leverage. Just wondering, maybe it was meant to be

Disclosure : I never had, and never will have, a bitcoinica account and am still dubious (although open minded) regarding the benefits of such systems.

Kronos.io soon: http://www.thebitcointrader.com/2012/05/meet-kronosio-ringcoins-answer-to.html

Egads... who would want to attempt to speculate on a market that barely moves from 5 per BTC
with bitcoinica costs being so high to get in and out plus the costs of holding a position?

I gave up on it. Withdrew my money a month or so ago and have been just selling my BTC from
mining when the price is over 5.

I am much happier for it. Now combine that with the hacking of bitcoinica through admin incompetence,
it appears to have been the correct call. Now my money is not tied up in a situation like that.

win win. I will mine and sell until it is no longer worth it and move on.

+1

Maybe buy shares of mining companies instead of selling, so u can mine while u mine. Yo dawg.

wurd... :D

That's what I'm doing, and the dividends are fantastic.

Buy BMMO (https://glbse.com/asset/view/BMMO) they pay the best! :D

Trading USD/BTC futures on ICBIT.SE (coming really soon). Along with BRENT and GOLD futures coming up too. It's safer for users since it's open market and not just a bucket shop.

More info here - https://bitcointalk.org/index.php?topic=50817.0 and here https://bitcointalk.org/index.php?topic=60548.0 .

If you really want leverage, just take out a big loan in your home currency, and then trade yourself right into the land of riches.

Yes... it's that easy... that's why everyone is doing it  :-\

Seriously though, trading is tough stuff. Most people who try it blow out.

BitcoinOPX.com has just opened to the public and provides an avenue for leverage. Traders can create options for 10, 100, or 1000 BTC but only put down a fraction for escrow. Below is an example.

Bob only has $500, but thinks he knows for sure the BTC price (currently $5.20) will go down below $5 in one week. With $500 he can buy 96 BTC. If the price moves $.20 he stands to gain or lose 96 x $.20 = $19.20 at most.

Instead he creates a CALL 100 option with strike price $5.25, which means he will pay the owner the difference between strike price and actual price at maturity multiplied by number of bitcoins (if market price ends up higher). So if the actual price ends up at $5.50 he would owe $.25 x 100 = $25. He places the option on sale for half the price of estimated payout (for those betting long) $12.50.

The system uses a formula to calculate the amount of escrow Bob must use to cover the option, which comes to $58.53. With $500 Bob can create and sell 8 of these options which gives him 8 x $12.50 = $100.00 if all his options sell.

If Bob is right about the direction of the price he pockets $100.00 profit. Actually there is a trade fee of $.65/contract so we subtract another $5.20 leaving a net profit of $94.80. That's $75.60 more than Bob could have made exchanging BTC directly.

Really, I feel like leverage (buying 2x what your investment can support) wasn't even that important compared to the ability to go long with BTC, or go short with USD.

If you're confident that the price will go down, in the current market, you can only trade on that confidence if you already hold the currency you think is going to go under. This shuts out people who are standing outside the community's hype from providing a voice of reason. With Bitcoinica or something similar, a person who never bought into BTC can "sell" and mellow out the market when sentiment is irrationally bullish, and a true believer (who has lots of BTC but little fiat) can "buy" and mellow out the market when sentiment is irrationally bearish.

That's the stabilizing influence, not the ability to make huge dumb bets that will explode in your face if the price drops 25 cents.

Exactly the reason to have futures market. Leverage (if someone wants to), ability to go short or long as one wishes, positive infuence on the spot market (stabilizing price, possibility to hedge risks).

While I think basically another possibility to create and trade in options would be a valuable addition to the bitcoin universe, especially for BitcoinOPX there seems to be a chicken and egg problem -- unless someone acts as market maker. Before a lot of people make heavy use of optoins, there is zero chance to get a suitable option for any given demand.

-- Ichthyo

Ichthyo,

You are right about the chicken and egg problem. I think the Bitcoin universe is still a bit too small to see spontaneous options created for their true function, which is making profit on the intention to buy or sell an asset (writing options).

This is one reason we're working on adding expanding trading categories to include gold, euros, and some tech stocks with our existing contract for difference model, which means traders don't need to own the underlying asset.

It's not prudent for us to act as market maker on a derivative like options, and not an actual commodity.

I bought some Absorb assets on GLBSE:
https://bitcointalk.org/index.php?topic=82530.0

And on June 14th, new POLY assets slightly more elaborate should start trading:
https://bitcointalk.org/index.php?topic=86069

Actually, I disagree - this could be the perfect vehicle for miners and other bitcoin holders. Covered calls in the money at inception are a great way for the bitcoin owner to make a fixed short term income based on their long term position.

For example.

I want to "lend" 1000 coins.

Current price is 5.75.

I issue a 1000 call at a strike price of 5.50  for 0.635 per coin or a $635 contract price for 28 days from now.

If bitcoin goes up past 6.135, I lose my coins, but I get $5500 plus the contract price of $635. Basically I locked in a sell price of $6.15  (7% monthly return)

If bitcoin is between 5.50 and 6.135, and the contract is exercised, I still get the $6,135. I effective sold at $6.15. (7% monthly return)

If bitcoin goes below 5.50, contract is not exercised. I keep my 1000 coins plus I now have an extra $635 I can pocket or buy more coins with.

We don't need one market maker, we need a group of miners to use covered calls.

BTW - why would someone want to buy a call already in the money? 1. They would like to speculate the coins are going up past the 6.15 with out buying a single coin. 2. They are selling coins lent to them to convert to fiat for a purchase, and want to ensure they can pay their loan in bitcoin later.

This has been your friendly neighborhood covered call lesson.

@waltmarkers: I completely agree. Thanks for that textbook example of the advantage of writing covered calls as applied to Bitcoin.

I would add a 3rd reason for someone wanting to buy a call already in the money: As I noted above options can provide leverage. If a person believes the price is heading to $7.00 for example and has $635 they can either buy the option you mentioned or buy bitcoins directly. If they buy bitcoins directly at the current price of $5.75 they can afford 110 bitcoins. Multiplying that by the difference gives 110 x $1.25 = $138.00 is the maximum they could profit from that price move.

However, buying your option at $635 yields 1000 x 1.50 = $1500, then subtracting the $635 = $865 of profit they could make. Quite a difference. More risky, of course, but no comparison in terms of profit potential.

Perhaps I should be explaining this to the miners...  ;)

We have launched futures trading at https://icbit.se (https://icbit.se) yesterday. "Leverage" is about 1:4, you're welcome to try it out. In case of any suggestions or issues - please use this thread: https://bitcointalk.org/index.php?topic=50817.0

dammit, whats with margin trading?
KRONOS!!
BITDAYTRADE!!!!
WHERE ARE YOU??

Does anybody use https://bitcoinopx.com ???
Any volume there as of now?

That's what I mean - those who want to trade with margin are welcome to trade futures. We provide some liquidity ourselves too, so there is volume from the start. Plus, the market is transparent and open to everyone, so it's better than a bucket shop where you have to play by their rules.

Bytheway, I just started a twitter feed to give out various small updates happening to the website. https://twitter.com/icbit_se for those who's interested.

I've used LTC for leverage. Made about 900% since march since I bought LTC. Converted to BTC then to USD after BTC peaked.

How much did you invest 10 bucks?

$1350. Bought btc at $4.80 and $5.20

Wanna be a troll now? ;D ;D ;D

Edit: Sold 227k LTC for 1256 BTC....then price rose to $9.20

Then how do you get your 900%?? It doesnt add up yet.

Show me your math so I can show you where your error is...the math adds up for me bro.  ;D ;D ;D ;D

Edit: I'll have you know that I bought LTC at 0.001btc/LTC. And I bought about 227k of them.

Aha, now we got all the pieces for the equation. Congratulations, your math is right!

My math was never wrong. You just never asked the right questions for the right data. Boo hoo for u lol

did you guys see this new site?

https://bitcoinopx.com/how-it-works


their options are kinda confusing... but it would seem to offer some kind of leverage.

Hey everyone,

I'm happy to announce our exciting new change: hourly options

https://bitcoinopx.com (https://bitcoinopx.com)

We've had lots of interest since launching in June, but little volume. This is probably due to our options schedule not fitting in well with the needs of the Bitcoin community. Hopefully that's now changed. People deposit, withdraw, and trade bitcoins on exchanges 24/7, so it makes sense hourly scheduled options might be a better fit :)

This can certainly provide leverage as we have option sizes of 1, 10, 100, or 1,000 bitcoins. Mt.Gox currently shows a swing of over $1 in the last 24 hours. Multiplying that by one of the option sizes results in good leverage opportunity.

Details are on our updated How it Works (https://bitcoinopx.com/how-it-works) page.

We hope you'll try out our new set up, and let us know what you think.

Happy trading! :)

We've also added trade examples (https://bitcoinopx.com/trading-options) on our options overview page. Create options from 1 to 24 hours away! Please let me know if you have questions.

Update: thanks to user feedback we've now switched to American style ability to exercise options anytime before maturity!

If the market price is above (or below for puts) the strike price you can exercise the option immediately and cash out your payment.

We've also added a handy view all link on the Trade page to see all active options on the same page.

at least Bitdaytrade is making progress.
I am beta testing the Btc/USD Contract for Difference feature right now