Bitcoin Forum

Not now, but in december... I'm pretty sure that they will be that much and even higher in price... So, what do you think about futures, people? Is there are anybody who is ready for this kind of agreement and how we can make it :)?
 (let's say that for the moment it's only a study, but I'm really thinking about this possibility)...

I've read a few other posts about futures and it seems very interesting. 

If I am not in mistake... the future deal is this: you pay now for anything that will receive after few month. Usual this kind of deals is a good for both side.

I can use the money to make a new system now and mine more BTC, keep save for you to give you in December where you can sell it more than 44$ and make more profit. We both can win in this deal.

So if you pay me now 150BTC for 44$ each I agree to give you 150BTC in December.

Regards,
Saykor

This kind of thing requires a lot of trust.

However, you can easily buy 150BTC for 15-16 right now, why would you buy them from me for 44$ now?

It's a futures agreement where you would agree to sell them to someone for $44 in the future, in this case December.  Their hopes are that by December bitcoins will be worth more than $44 and therefore they will make a profit.  Your hope is that they won't be $44 and that you will be making a profit.

yes you are right. what was the name of my type of deal that i told above?

So, you're not actually ready to do this contract.  Otherwise I would consider it (nominal physical delivery of BTC in December and I assume you mean payment in December as well)

Futures agreement is a still very interesting for me. But... what is my guarantee that if the price drop in December the other side will still pay me?

as striker11111111 say "This kind of thing requires a lot of trust."

Yes I understand it

but if someone thinks that bitcoin gonna be worth 44++++ in december, why not buy now at 16? What do they gain by waiting until december? Even if it was gonna be 60-70 by then, still better to buy now.

Only advantage is if they don't have any money now but will be getting a lot more later, correct me if I'm wrong.

Why would you do this?  They cost less at the moment.

Even if at the end of December they are worth $50 and you make a profit, you would have made more money by buying them at the current rate.

I think he means he'll pay in december too, so nobody pays anything until december. That makes a lot more sense.

he wants a call probably, if so I potentially could sell such a call for about 4$

I will answer you why.
Why you will make a deal to buy in December and not now:
1. You make a deal now and now will keep a money in bitcoin until December. So you can use your money in the next 6 month. If you buy now and wait to sell then in December this is a 6 month where you not will use your money.

Why someone will agree to supply you with a bitcoin in December:
1. Yes the person that will sell the bitcoin in December can buy them now but this mean that he now will use his money for other thing 6 month. If he have a money that can invest now it have this option.
2. Second reason why someone can make a deal to see in December on a fixed price is that he is a happy from the price, he will know for what will work in the next 6 month, will know how many profit will make.


The advantage? For who? What is the advantage for you if seller lost a money? The idea is not to make a seller to suffer when he sell you on 44 but price is more than 44.

The idea is you to be save:
1. you to not keep a money 6 month.
2. you will be save from some system crash and steal in this 6 month when you not invest in bitcoin.

Regards,
Saykor

Let's say he doesn't have the money to buy them right now. He arranges an agreement where he can buy a product for a set price in the future. He might lose money, he might make a ton of money.. it's a gamble.

Now if he had the money to buy right now, he probably would. But let's say that he has a contract that pays net 120( seen it in agreements before) he obviously has no access to the money now but has a reasonable expectation that he will have the money in the future and wants to set a buy price where he has the potential to make a killing. $44 seems like a number he pulled out of his ass but for the sake of the argument it still fits.

He can sell the contract in September (or any other month) as well. If Bitcoins were $150 in September, he could sell the contract to someone else at a profit.

if he find someone to buy it of course.

who will buy the contract on price 44$ when it is 150$ in the moment and will lose a money?

Futures contracts are not the same as call options.
I will try to explain the difference.

The buyer of a call option buys the right to enter into a transaction at the agreed upon exercise-price during the contract period (or only at the end of the period, depending on the type of contract). The buyer of a call option needs to pay the option price up front, but is not obliged to exercise his right. Obviously he would only do so if the actual price goes above the exercise price, and he would make money only if the price rises to exercise-price plus the amount paid for the option.
The pricing of these options depends mainly on calculations of the risk/chance that the exercise price will be hit.

A Future contract is an entirely different animal. With a future contract there is no payment upfront either way, it is an outright buy per a date in the future, at a price agreed upon at the outset. Both parties are obliged to fulfill the contract at the end of the agreed upon period.
For the pricing of these future contracts in the real world, at least for financial values, the only determining factor is the interest rate for the contract period.

Obviously, without a trusted exchange that carries such products and solves the trust issue, neither options nor futures are viable instruments for the bitcoin market.
 

I knew the mark of the beast was going to be a QR code.

Trust not required if done properly - margin calls fix that - both an agreed initial margin and margin variations.  If one side doesn't perform, the margin is lost to the other side would be a bonus.  Helps if there is a clearing agent doing the calls/holding the funds too.

Having a call option is another variation - $4 premium - interesting there is a number attached to it already, well done, but no thanks.  That combo doesn't work for me.

The contract is traded on market prices. There's always a market. That's how it works.

the contract is to supply xxx goods and receive a yyy money. nobody care how it will supply it. If it will buy or produce the goods it is choose on supplier

I'm sorry, but I really don't understand what you're saying. Correct me if I'm wrong, but it almost seems as if you're trying to refute the notion that futures contracts are traded on an exchange.

if the contract is to buy 150BTC for 44$ each to December what is the difference and who care if this 150BTC is buy now, produce for 6 month or buy in December?

The idea is the buyer to get his 150BTC on 44$ each. Right?

I not will care from where seller will have 150BTC to give me ( if i am the buyer ). I not will care if he buy them now on 15$, produce it in the next 6 month or buy in December. If the seller cannot supply the 150BTC then he need to buy them on the price in December of course.

I only ask how is the system. I am not a stock exchange trader.

I'd be willing to do it, but what guarantee do I have that you will actually have the money and pay for them in December?

both side need to pay some deposit who will lost if one of the side is not correct

They don't need to be traded on an exchange - many contracts are done directly between buyer and seller (say a physical delivery wheat contract).  You buy my crop next year for $200/t and I'll deliver 1000 tons.  If there is a drought, I'm in trouble, if the weather's good, I'll do ok.

You might then decide to on-sell the contract, and an exchange facilitates that.

Just to clear thing up… What is this possible deal is all about?
For sure, I'm not an idiot want to buy something 3 times more than it actually worth.
 Actually, I'm investing thousands of dollars but I don't want to spend more than I have, but, for sure,  by the end of the year I'll make some more money I can invest (I'm not a salary, I'm doing projects). So, I'm thinking about the possibility to invest money I'll have by the end of the year.

 Also, by making futures I'm making bitcoins worth more (Joe thinks: why should I  sell my coins now, while there are lot of guys who are ready to pay 3 times more for that. So, I'll ask more - it's not a great impact, but in case if there will be more people making futures it may has this effect).

Last I saw I thought you were testing this as an idea, rather than actually doing the trade - has that changed?

 Now I can tell... D-E-F-I-N-I-T-E-L-Y not, lol  :D.

It could be an awesome pwned, because He could bought them for less money in September. ::)

PS: Economic bubbles never are good.

Futures only make sense if you have a futures EXCHANGE.

Nobody would pay >$x for delivery TOMORROW (or next year) if the price is currently $x. They could simply buy at $x.

A futures exchange removes counterparty risk AND allows leverage.

You can buy for >$x for delivery tomorrow (or next year) for a fraction of $x and only pay the difference on delivery.

Hmmm, I'm not a finance guy, so I don't know; but this doesn't sound right.

I thought that futures worked so that you bought something now that the seller doesn't have yet.

The classic example is the farmer.  The farmer can sell (say) wheat at $100 a kilo in September; but to do so he needs to spend money now to buy seeds, labour and tools.  If he doesn't have that money, he will get $0.  A futures buyer offers $90 per kilo right now; giving the farmer the capital he needs to produce the wheat.

i.e. the money changes hands now; the product changes hands in the future.

Have I misunderstood?

The example of the farmer relates more to the uncertainty of the weather and conditions. He does not get paid now, but is guaranteed to get a set revenue in the future. He is setting the future price now, and that price varies as we get closer to the maturity date. The counter risk is that if there is storm that ruins all the crops, the farmer does not go broke but the other one loses out.

Exactly futures don't allow upfront payment of non-delivered goods.  I mean can you imagine the counterparty risk of that.    Futures just allow you to LOCK IN  a futures price.

So in the farmer example say the farmer's cost is $3 per bushel.  The current market price is $8 per bushel which would be a record year for the farmer.  However the farm has huge risk.  He looks out and sees the harvest time futures contract is $7.85 per bushel.

Now the farmer could just do nothing wait till harvest hope it is good and sell for whatever the market price is.  What is everyone's harvest is above average and the price plummets by harvest time.

The farmer can lock in revenue stream NOW.  He doesn't get the cash now (he doesn't get any cash until settlement) but it protects his future revenue stream.  Likewise the baker locks in a price for his raw goods.  Granted the price is "high" but the baker may estimate he can still be profitable @ $8 per bushel but if the crop is very bad and prices skyrocket to $20 per bushel he would be ruined.

Futures are simply a way to trade RISK.  The farmer and baker are trading RISK.  The speculators aren't buying bushels of wheat they are buying RISK.  The counterparty to the farmer wins if the crop is worse than expected and prices rise.  The counterparty loses if the crop is better than expected and prices fall.

Now if the counterparty had to worry about the farmer delivering that woudl make trading contracts very difficult.  Every contract would be different (not fungible) due to different counterparty risk.  An exchange requires the farmer to put up a deposit which is "locked" when he sells the contract.  This allows the exchange to guarantee the contract and eliminate counterparty risk.  Now farmer A contract is equal to farmer B contract and they can simply be traded as "generic" wheat futures.  The exchange can also allow buyers to buy with only a fraction of the contract  cost.  At expiration if the buyer doesn't have the cash to buy the contract in full then he can simply sell it to someone else and still profit from the difference (contract price vs current market price).

So TL/DR
A futures deal only make sense if an exchange exists because the exchange providers counterparty insurance, liquidity, and leverage.

No there is too much risk in that.  So farmer gets money up front and decided to skip town to caribeean, or wasn't really a farmer at all, or had a bad harvest.  The exchange would eat the cost or the buyer would eat the cost.  If the buyer eats the cost then you can't have a "wheat future" you have a "farmer Bob, SSN xxx-xx-xxxx credit score: 720, 2.2 acres in southern nebraska, 18 years experience wheat future".

It becomes non-tradable because each future contract's risk varies from contract to contract. 

No to "fix" your example above.  The farmer sells a future's contract.  He gets NO MONEY.  Yes his exchange account will be credited w/ the funds but he can't withdraw them because it is something like this

Cash: $100,000
Futures Contract -12,500 bushels of wheat to be delivered at x on x day.

He can't remove the cash until he satisfies the contract.

NOW he can go to the bank, use his brokerage account as collateral and take out a loan or line of credit against it.
When his harvest comes in, he delivers the wheat, clears the contract from his brokerage account, repays the bank, and keeps the balance.

I'll disagree with some points - mainly:

You don't need an exchange - that helps trading contracts, but OTC futures are bilateral.
Usually futures require an initial margin - an upfront payment, and margin calls to manage settlement risk.
Many cases you can be prepared to pay >$x if the price is $x now - reasons include time use of money/cost of funds, or even costs of storage.

As for the poor farmer example I agree - it can work against you too.  Funding cost of production ($3) in the hope of an $8 payoff crashes and burns when the drought wipes out the crop.  In order to satisfy the contract they might need to by at $20!  (based off a real example - farmers on wheat contracts walked off their land and simply defaulted.)