The Starting Of The "Bitcoin Derivative" - What side are you on?

[sgbett]

I'f I've got millions riding on a given strike price, and it only costs me thousands to move the price where I want it ....

I think the bank that would issue such options - or anybody who would buy it "against" you - would be fools to accept it for any amount exceeding the hourly volume of MtGox.

Your counterparty is unlikely to be one person. It's the aggregate of everyone that took the opposite position. Either a punter who went naked on leverage, or if there were no sellers for your buys, then the broker would (should) have hedged the position.

What people ought to do, and what people do... two different things!

People do stupid stuff all the time, I'm certainly not exempt from that!

[sgbett]

In reality the underlying asset is not traded, instead the math is done and the money is transferred from one party to the other.
Effectively the profit and loss is derived form what would have happened if the two parties had bought/sold the equity. Hence the name derivative.

If the underlying asset is not traded, then the real price cannot be known, especially in a small market like bitcoin.

If the "option" (to buy/sell BTC) is no longer an option and can be replaced with a settlement in fiat at the discretion of the "losing" party, then it is no longer an option, but only a side bet.

Designed for gamblers.

What did you think options were !?

Stuff designed to stabilize the price for those who need it - and are ready to pay for it

Like corn options for corn farmers/pop corn producers. Oil options for oil companies/refineries/fuel retailers ...

Am I realy dreaming ?

For sure if you own the underlying asset, or perhaps your livelihood depends on say a minimum corn price, then options can be useful took to hedge.

I'm not sure wall st plays it like that though