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December 24, 2013, 11:35:02 PM |
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(Sorry I posted this in the technical development discussion thread but I can't delete it, I think I'd get more responses here.)
Hi guys, I'm not a trader, or a finance guy and so I think what I'm describing may be a common form of options trading that I'm over-complicating, but here's the idea... (If it's already possible to do this in BTC-world please direct me to the site, thanks, Merry Xmas! Smiley)
How to unlock the potential future value of your BTC profits today
Instead of selling your BTC to unlock value out of your portfolio it may be possible to sell a small % of your future potential profits today instead.
Why would someone want to do this?
Though Mr. A is uncertain of the timing and expects alot of volatility in the interim, he believes BTC will really take off in the future.
However he needs to unlock value from his BTC holdings today. (And perhaps a constant amount every month.) But he doesn't want to sell his BTC holdings as it's possible he might have very little/no BTC left by the time it takes off.
However when/if Bitcoin does take off in the future Mr. A would be happy to cash in some of his profits.
But the problem is MR. A needs $ now. Is it possible for MR. A to sell some of his potential future profits today?
Example:
Date: 01/01/2014
Price = $1000 per BTC
Mr. A has 100 BTC
Mr. A decides he will trade 10% of the profits that his BTC have made on 31/01/2014 if the free-market fee he can get today justifies it.
So he offers up the profits from 10BTC's on the options exchange.
Enter Mr. B
Mr. B has X dollars
Mr. B is bullish on BTC, instead of just buying a BTC he'd like to buy a levered position. He sees for a fee he can take the profit 10BTC's could be in at 31/01/2014. He also sees that his losses are limited to the size of the fee. (So from his point of view it is an option to to take a levered position on the future value of BTC at a specified date with a limited downside (his fee) but unlimited upside potential.)
Mr. B will make Mr. A an offer. The exchange will simply faciliate the option when two participants agree on a price.
Let's say they agree on $1000 (Market forces will determine the price)
The exchange will pay the $1000 fee from Mr. B to Mr. A, once Mr. A has sent to 10BTC to a '2 of 3' address. 1 private key will go to the exchange, 1 to the Mr. A and one to Mr. B (That way the exchange can't run off with the money and if it is ever shut down Mr. A & Mr. B can send their private keys to a third party that they trust to distribute the BTC at the address accordingly.)
On the 31/01/2014 if the BTC price has stayed the same or fallen all the 10 BTC are returned to MR. A. If the BTC price has risen any $ profits are sent to MR.B and MR. A is sent back the value that those 10BTC had on 01/01/2014 in the form of fewer BTC.
This option has allowed Mr. A to sell a small % of his potential future profits at a specified time as opposed to selling a small % of his BTC.
That way if BTC stay flat or declines for an extended period of time, Mr. A will have benefited as he was able to get a $1000+ steady income a month from his 100BTC portfolio without having to decrease his postion. If/when BTC does take off he will still be keeping 90% of profits.
Is this type of trade already possible? If not do you think there is a market for it? Thanks for your feedback
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