ICBIT Derivatives Market (USD/BTC futures trading) - LIVE

[Fireball]

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[jaybny]

The futures contracts are all wrong!

see my thread: https://bitcointalk.org/index.php?topic=152784.0


the tick value is not uniform.. the miostake is that theprice is quoted in USD/BTC but the lot size is 10USD?

so the contract value is 1/price * 10 ? Lot size should be a multiple of BTC not UDS. I believe your margin calcs are all wrong. Should stop trading and reverse all trades.

what a joke.

[Ichthyo]

The futures contracts are all wrong!

...calling a futures contract "wrong" is a bit of a stretch, since a future is a derivative and basically just works the way it is defined. We might debate if what you call a "future" must work exactly the same way as a "future" in the world of the conventional banking industry? Personally I don't think so, Bitcoin is a new endeavour, and we can make things the way we like.

the tick value is not uniform.. the mistake is that the price is quoted in USD/BTC but the lot size is 10USD?

so the contract value is 1/price * 10 ? Lot size should be a multiple of BTC not UDS.

The author of ICBIT, Fireball, has pointed out numerous times that he wants to build a platform were all accounting is done in Bitcoin, not in fiat any more. Thus, all of this debate boils down to the question:

<irony>
is 1 BTC more "valuable", when there happens to be an exchange rate to an obsolete, irrelevant, failed currency called USD somewhere in the lesser developed parts of this planet, and this exchange rate is now at $50 / BTC ?
</irony>


@Fireball:
People are now trading Gold and Oil futures on your platform since quite some time, and this shows that people are capable of working out the "right" price. Don't you think this indicates that its time to create a new futures contract, e.g. for $100 per lot, which is quoted just plain-flat in Bitcoin, the same way the Gold and Oil futures are quoted plain-flat in Bitcoin?

[jaybny]

The author of ICBIT, Fireball, has pointed out numerous times that he wants to build a platform were all accounting is done in Bitcoin, not in fiat any more. Thus, all of this debate boils down to the question:

i agree.. but there is a way to do this with linear prices. see EURUSD futures on CME. All accounting is done in USD, and there are linear fx futures contracts.

http://www.cmegroup.com/trading/fx/g10/euro-fx_contract_specifications.html

[picobit]

The futures contracts are all wrong!

see my thread: https://bitcointalk.org/index.php?topic=152784.0


the tick value is not uniform.. the miostake is that theprice is quoted in USD/BTC but the lot size is 10USD?

so the contract value is 1/price * 10 ? Lot size should be a multiple of BTC not UDS. I believe your margin calcs are all wrong. Should stop trading and reverse all trades.

what a joke.

Sure, it is a bit strange that the price is quoted in inverse - but exceedingly practical!  If you want a "linear" future, just convert the prices in the order book to BTC/USD, and it behaves just like you expect.  I do the opposite with the gold future, to convert to an "effective BTC price" since BTC are more volatile than gold.

Suggesting that they reverse all trades just because the futures contract behaves exactly like it is described on their web pages instead of like you expect seems a bit ... extreme.

[jaybny]

The problem is that iCBIT is calling this a futures contract.. when in fact its more of an exotic derivative.

When someone buys a futures contract, and has 100% of the value in cash, he would expect never to get a margin call. If he buys a 100 oz Gold future contract at $1000 an oz, the contract value is $100k. If he has $100k in his account, he can sleep knowing that he can never get a margin call.

When a hedger shorts a commodity futures contract to eliminate the risk of his physical holding going down, he should be able to sleep, knowing that no matter how high the price goes, come settlement the price of his short contract and his physical commodity will converge.

If a trader has $5000 in cash and 100 shares of AAPL stock worth $400, and then he shorts an 100 lot AAPL future contract at $500 . He knows that even if AAPL goes up 100% to $1000 and wipes out all his cash, he can always sell the the 100 shares at $800 or even more. He knows that if he owns the stock and shorts the future, his risk is very small, and barring an extreme move, the prices will converge at expiration.

However these iCBIT "Exotic Derivatives" do not act anything like a futures contract.  

Long Case:

1. Trader has 1 BTC in his account
2. He buys 1 BTCUSD futures contract at $10

    The iCBIT screen shows him that his contract equates to 1 BTC. The equation is 1/10 * 10 = 1 BTC .

    He has 1BTC in his account, and has a futures contract worth 1BTC. Naturally he assumes that his 1 BTC would cover his loses all the    way down to BTC price of 0.0.

3. Price of BTC drops to $5. he would expect his account balance to be .5 BTCs. Instead he learns that he is wiped out and now has 0BTCs.

    PnL = -(1/5 - 1/10) *10 = -1/10 * 10 = -1 BTC

    How can he lose 100% of his BTCs when the price only dropped 50% and he had enough BTCs to cover 100% of the contract when he opened it?  
          Answer: "EXOTIC DERIVATIVES"  

    As the price drops the size of the contract in BTC is getting larger! By the time price hits $5, he is now long 2 BTCs! The equation is 1/5 * 10 = 2 BTCs


Short Case:

1. Merchant has 100 BTCs coming in next month and wants to lock in the current price, to eliminate the risk of a drop in price.

   The formula for getting short exactly 100 BTCs is  10*Price = size. So if price is 20 size is 200, if  Price is 4 size is 40.

2. At expiration time, the BTC price is up 50%. The Merchant is not worried, because he has already locked in his price. Whatever he loses in the futures contract he makes up from the gains in his 100 coins. This the classic case for futures, to hedge against falling prices.  

Not so fast... our Exotic Derivatives have a special feature. It is price dependent!   For all BTC prices above $10 the hedge will work perfectly, however for all BTC prices below $10 he would lose more on the shorts then was gained in the price!  

----------------------------
If it looks like a Duck, but doesn't act or smell like duck.. its a Penguin!  
----------------------------

• iCBIT can call it a "Futures contract on the Bitcoin - US dollar exchange rate".
• iCBIT can claim their "Futures contract"..  is like other  "standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today"
• iCBIT can say that they " are similar to any major futures exchange."
• iCBIT can list the "Typical use cases" on, who, how, and , why uses futures contracts to hedge.
• iCBIT can flat out deceive its traders by saying "Traders who want to arbitrage and make the market.
      Trading futures contracts provides perfect possibility to arbitrage between spot market and futures market"

It doesn't change the fact: there are no BTC futures contracts traded on their exchange!. Rather, they offer toxic exotic derivative time-bombs that are erratic, unpredictable and impossible for any of us mere mortals comprehend.

 

maybe you can start with changing this page to the truth: https://icbit.se/futures

[starik69]

there are no BTC futures contracts traded on their exchange!. Rather, they offer toxic exotic derivative time-bombs that are erratic, unpredictable and impossible for any of us mere mortals comprehend.

Trading on iCBIT for seven months without any problem. Got some good profit. What am I doing wrong?

[Fireball]

Good discussion! (it reappears once in a while though )

Really, please propose alternative futures, I will review and if all is well, we can just launch them.
The only real proposal I got so far is to launch additional linear USD/BTC, quoted in USD per BTC and with margin transferred in USD. But this requires dealing with USD in addition to BTC, and my desire was to help BTC economy grow, not add yet another dependency on US Dollar.

But anyway it's up to traders. Every exchange exists to service traders.

[Fireball]

@Fireball:
People are now trading Gold and Oil futures on your platform since quite some time, and this shows that people are capable of working out the "right" price. Don't you think this indicates that its time to create a new futures contract, e.g. for $100 per lot, which is quoted just plain-flat in Bitcoin, the same way the Gold and Oil futures are quoted plain-flat in Bitcoin?

Please explain. Like, $100 lot contract, quoted in BTC per $100, e.g. current price of that futures would be 2.0946 ? That's nearly the same as the existing one, just without the inverse part (price inversion and sign inversion) and with higher lot size - $10 instead of $100.

I'm all for eliminating confusing parts. As a futures trader myself I certainly understand all complexities related to the currently trading BTC futures.

[labestiol]

I personally have no problems with the way these contracts work. Sure, it's different from a classic future, but it accomplishes the same goal.

The real problem here stays liquidity, and that's what I would want to see improved.
Lower fees, decreasing fees, price-dependent fees, lower fees for market-making. There's plenty of solutions on that side.

Another way would probably be to increase confidence on the platform, especially for newcomers (the classic "what's preventing him to run with my money" problem). But for that I have no clue, other than incorporating which doesn't seems to be your choice (and even that is limited).

[jaybny]

Good discussion! (it reappears once in a while though )

Really, please propose alternative futures, I will review and if all is well, we can just launch them.
The only real proposal I got so far is to launch additional linear USD/BTC, quoted in USD per BTC and with margin transferred in USD. But this requires dealing with USD in addition to BTC, and my desire was to help BTC economy grow, not add yet another dependency on US Dollar.

But anyway it's up to traders. Every exchange exists to service traders.

i do have some specs for a real BTC futures contract. will get back 2 u in a day or 2. cheers

[picobit]

It is not an exotic derivative.  It is just a derivative of the USD traded in BTC, where the price for convenience is labeled in USD/BTC instead of BTC/USD.  So it is not terribly suitable for protecting an investment in BTC, it is much better for protecting an investment in USD.

Perhaps the solution would be to list the price in BTC/USD, and with the price in USD/BTC in parenthesis.  I suspect it would be a bit confusing, however.

[alpet]

Who presents this awesome cotango on BUM3? Now it price above $10 vs MtGox average, and sometimes above $20 - true free cheese for arbitrager, or I something dont understand )

Free profit formula:
Incoming money = $480.
Buying 10 bitcoins for $48 (spot-price), selling short 10 bitcoins full covered ( 61 BUM3 contracts, right? ).  

June expiration cases:

BTC price |	Profit in USD | by futures	Profit in BTC (real) |	rest BTC |	rest USD |
$20	410	20.5	30.5	610
$48	130	2.7	12.7	610
$100	-390	-3.9	6.1	610
$200	-1390	-6.95	3.05	610
$1000	-9390	-9.39	0.61	610

In every case, I have profit $130 or ~27% with no risky (except force major situations).
Please correct me, if I wrong.

[jaybny]

Who presents this awesome cotango on BUM3? Now it price above $10 vs MtGox average, and sometimes above $20 - true free cheese for arbitrager, or I something dont understand )

Free profit formula:
Incoming money = $480.
Buying 10 bitcoins for $48 (spot-price), selling short 10 bitcoins full covered ( 61 BUM3 contracts, right? ).  

June expiration cases:

BTC price |	Profit in USD | by futures	Profit in BTC (real) |	rest BTC |	rest USD |
$20	410	20.5	30.5	610
$48	130	2.7	12.7	610
$100	-390	-3.9	6.1	610
$200	-1390	-6.95	3.05	610
$1000	-9390	-9.39	0.61	610

In every case, I have profit $130 or ~27% with no risky (except force major situations).
Please correct me, if I wrong.

shhhh... you are so wrong!  

this is why i spent 12 hours analyzing things... if it was a true futures contract you are 100% correct. but there are some outlier situations where you can get hurt. anyways dont tell anyone about this.. of couse the future prices should be much higher than spot! 

[jaybny]

It is not an exotic derivative.  It is just a derivative of the USD traded in BTC, where the price for convenience is labeled in USD/BTC instead of BTC/USD.  So it is not terribly suitable for protecting an investment in BTC, it is much better for protecting an investment in USD.

Perhaps the solution would be to list the price in BTC/USD, and with the price in USD/BTC in parenthesis.  I suspect it would be a bit confusing, however.

you are correct, it is much closer to a USD future than a BTC future.. but a USD future would be quoted in BTCUSD not in USDBTC. So you see the marketing and description of this as a hedge for BTC is just wrong https://icbit.se/futures.  For a true USD contract there should be a contract size... l like $500 USD... 10 * BTCUSD is what causing the funky stuff... It kinda reminds me of the 3 time leeraged ETFs.. where both the long and the short version, are down 90% for the year .. (off topic)

[koin]

with no risky (except force major situations).
Please correct me, if I wrong.

if you woke up tomorrow morning and icbit.se gave a browser timeout, and that was the end of it, where would you even start to look?

[jaybny]

there are no BTC futures contracts traded on their exchange!. Rather, they offer toxic exotic derivative time-bombs that are erratic, unpredictable and impossible for any of us mere mortals comprehend.

Trading on iCBIT for seven months without any problem. Got some good profit. What am I doing wrong?

im only talking BTCUSD futures. anyways, 2 monkeys throwing darts at the order book, 1 of them will have positive PnL...

[starik69]

only talking BTCUSD futures. anyways, 2 monkeys throwing darts at the order book, 1 of them will have positive PnL...

I personally know a third monkey who got margincalled but nevertheless got >100BTC profit from BTCUSD futures

[jaybny]

touche 

[alpet]

1. if it was a true futures contract you are 100% correct. but there are some outlier situations where you can get hurt. anyways dont tell anyone about this..
2. of couse the future prices should be much higher than spot! 

1. I  tasting this instrument, and can see what formula works in large range prices (symmetric USD var. margin for  Δf (Δ price)). All the difficulties in calculating the size of the position in futures contracts for delta neutral position in bitcoins.
2. IMHO bitcoin is locally bubble, is overbought, so price can be dramatically and fast dropped. In any case, too extreme deviation in futures price, it is not profitable for buyers I think.