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Author Topic: MASSIVE options order on apex.co  (Read 10568 times)
Dragonkiller
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February 10, 2014, 08:57:58 PM
 #41

When do the options expire?

end of the month
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Bugpowder
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February 11, 2014, 02:25:33 AM
 #42

Last Friday of the month, Romania time.

When do the options expire?
Bugpowder
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February 13, 2014, 04:26:24 PM
 #43

Down 6500BTC.  Embarrassed
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February 13, 2014, 04:32:47 PM
 #44

Down 6500BTC.  Embarrassed
Seems like he picked the worst time to short those options.
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February 13, 2014, 05:48:53 PM
 #45

Down 6500BTC.  Embarrassed
Seems like he picked the worst time to short those options.

There's two more weeks left, a lot can happen in two weeks in Bitcoin.

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theta
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February 13, 2014, 09:21:05 PM
 #46

You guys assume that he didn't delta hedge the options, i.e. he didn't sell the exact amount of BTC needed to lock the gains from the options mispricing, as I explained earlier. I'm pretty sure that's exactly what he did and he locked a gain for any price of BTC < $5000, with the additional twist of counterparty risk (if the BTC was sold in the same exchange that's less of a problem).
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February 14, 2014, 12:30:39 AM
 #47

You guys assume that he didn't delta hedge the options, i.e. he didn't sell the exact amount of BTC needed to lock the gains from the options mispricing, as I explained earlier. I'm pretty sure that's exactly what he did and he locked a gain for any price of BTC < $5000, with the additional twist of counterparty risk (if the BTC was sold in the same exchange that's less of a problem).


But expiry in end of month, so by then,
If BTC drops to $700, (5000-700)/700*.1BTC = .614, or about a 25,000*(.49-.614) = 3100BTC loss
If BTC rises to $1000, (5000-1000)/1000*.1 = .4, or 25,000*(.49-.4) = 2250BTC gain

So if BTC is at $700, he has a 3100*$700 = $2170000 loss and if BTC is at $1000 he has 2250*$1000=$2250000 gain. Selling $2.2m worth of BTC at $850 or higher guarantees a riskless profit. It seems that the market making bot mispriced the options and someone took advantage of that ensuring an arbitrage.

I seriously doubt this is what actually happened. This position would be very difficult to hedge due to liquidity. A $2.17m loss is not easy to cover with a price movement from $850 to $700...
Bugpowder
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February 14, 2014, 06:34:26 AM
 #48

Down 8,300 BTC.

This strategy is actually looking pretty juicy now...  .82 per contract!
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February 14, 2014, 07:48:25 AM
 #49

Down 8,300 BTC.

This strategy is actually looking pretty juicy now...  .82 per contract!

I need to understand this stuff better... what do you mean the strategy is "looking pretty juicy"... isn't this a bad thing for the person who executed this strategy?
Bugpowder
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February 14, 2014, 08:42:43 AM
 #50

Down 8,300 BTC.

This strategy is actually looking pretty juicy now...  .82 per contract!

I need to understand this stuff better... what do you mean the strategy is "looking pretty juicy"... isn't this a bad thing for the person who executed this strategy?

I mean, there is a lot of value to extract by implementing the strategy from this current price point.  Though hugely risky too.
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February 16, 2014, 06:39:21 AM
 #51

Well, the MPOE bot stopped quoting due to "exchange divergence"

BUT, that guy short the 24,000 contracts is dead.

($5000-$430)/$430 * 0.1BTC * 24,000 contracts - 10000 BTC proceeds from original sale = about a 15,500 BTC  loss at the moment...

EPIC loss.  Complete annihilation of a trading account which was worth >$10,000,000 a few weeks ago.

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February 17, 2014, 08:22:24 AM
 #52

Well, the MPOE bot stopped quoting due to "exchange divergence"

BUT, that guy short the 24,000 contracts is dead.

($5000-$430)/$430 * 0.1BTC * 24,000 contracts - 10000 BTC proceeds from original sale = about a 15,500 BTC  loss at the moment...

EPIC loss.  Complete annihilation of a trading account which was worth >$10,000,000 a few weeks ago.



Is it over? Doesn't he have until the end of the month?
Bugpowder
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February 18, 2014, 04:57:59 AM
 #53

Well, the MPOE bot stopped quoting due to "exchange divergence"

BUT, that guy short the 24,000 contracts is dead.

($5000-$430)/$430 * 0.1BTC * 24,000 contracts - 10000 BTC proceeds from original sale = about a 15,500 BTC  loss at the moment...

EPIC loss.  Complete annihilation of a trading account which was worth >$10,000,000 a few weeks ago.



Is it over? Doesn't he have until the end of the month?

Depends if he was stopped out.  Since bot still is not quoting, I think he is OK.
Keyser Soze
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February 20, 2014, 07:57:28 AM
 #54

With the gox crash I can't imagine this guy hasn't been stopped out by now. Looks like MP will (probably) have a big payday this month...
Bugpowder
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February 20, 2014, 01:00:31 PM
 #55

With the gox crash I can't imagine this guy hasn't been stopped out by now. Looks like MP will (probably) have a big payday this month...

When the bot has stopped quoting, then exercise occurs at the last quoted price.  So nominally he is still only down ~6500BTC.  Who knows how MP will interpret the contracts if Mt.Gox goes under.  But usually his interpretations are profitable for the site (and S.MPOE).  Waiting till closer to OpEx to see how this plays out...
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February 25, 2014, 04:24:08 AM
 #56

as bad as it is for the option writer right now, at least gox being dead will not count against the weighted price at settlement.
Bugpowder
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February 26, 2014, 03:33:59 PM
 #57

as bad as it is for the option writer right now, at least gox being dead will not count against the weighted price at settlement.

Presumably.  I haven't heard an official verdict on how they will be settled.  Looks like he is only down 8-9000BTC at the moment, I guess it could be worse :-P
chriswilmer
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February 26, 2014, 05:19:38 PM
 #58

as bad as it is for the option writer right now, at least gox being dead will not count against the weighted price at settlement.

Presumably.  I haven't heard an official verdict on how they will be settled.  Looks like he is only down 8-9000BTC at the moment, I guess it could be worse :-P


Would be so epic if he came out with a positive ROI on this trade. The stuff of legends.
Bugpowder
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February 26, 2014, 06:30:31 PM
 #59

as bad as it is for the option writer right now, at least gox being dead will not count against the weighted price at settlement.

Presumably.  I haven't heard an official verdict on how they will be settled.  Looks like he is only down 8-9000BTC at the moment, I guess it could be worse :-P


Would be so epic if he came out with a positive ROI on this trade. The stuff of legends.

It might actually happen too...  Or it might be refunded at purchase price.

Quote
See :
What is the reference BTC/USD ratio you use for options exercises ?

The 24 hour volume-weighted cross-exchange ratio is used, as published by bitcoincharts. The same figure is available in any IRC channel where gribble is present. The command is ;;bc,24hprc

26. What if that becomes unavailable ?

If the service is temporarily unavailable the MPOE market maker bot for options on MPEx will stop quoting. Exercises will occur at the last available price. This has happened a few times in the past, but the interruption never exceeded a couple of hours.

Should the service be unavailable for a longer interval I will devise some other way to obtain the data and calculate the average. In principle I would prefer for a third party to be doing this, but absent such it will be done by MPEx itself.

If for whatever reason there no longer exists a reliable way to calculate average prices (such as for instance MtGox being suddenly and permanently closed or other such catastrophic event) options will be refunded at prices originally paid.

These two statements are in conflict with each other. Bitcoincharts is still quoting, but Mt Gox catastrophically closed.

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February 26, 2014, 06:44:37 PM
 #60

well, a 24 hr average of zero and volume of zero should not move any averages.

funny thing would be if mtgox did what some originally anticipated in fixing the withdraw problem and letting withdraw go through, BTC may have shot up a lot (the old mtgox premium).
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