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Author Topic: How to lock in BTC price?  (Read 1372 times)
tistoni
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May 10, 2014, 07:21:01 PM
 #1

I have a problem.

I get paid 100BTC with $10 per coin and exchange that for $1000 today

In one month, I want to convert back my $1000 for $10 per coin to obtain 100 BTC

My problem is that BTC/$ price might change in 1 month. I want to know how much it would cost me to effectively lock in the current exchange rate for one month.

If you have any concrete links and show me how you arrived at your numbers, that would greatly help.

I've looked at futures contracts and in particular, icbit.se, but it is still not clear to me how I would calculate this cost of insurance. The cost may be derived as a percentage of the BTC amount I want to lock in.

Thanks.
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May 11, 2014, 03:09:16 AM
 #2

A futures contract can't do what you want. With a futures contract, you pay for the bitcoins upfront, and get the bitcoins sometime in the future, thus you can't invest your money elsewhere in the meantime (which I assume is the reason you're not simply holding your bitcoins for a month).

What you want is a call option, where you pay a small premium upfront, then pay the full (locked-in) price (called the strike price) when you want to receive the bitcoins. If you don't pay the strike price by the expiration date (which you won't if the bitcoin price has fallen, since you can get the coins cheaper by buying them directly), you don't get the coins and you lose the premium you already paid. Thus, the premium is the cost of this "insurance".

Unfortunately, I don't know of any exchanges that actually offer options trading (someone please correct me if there are).

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May 11, 2014, 03:24:25 AM
 #3

Unfortunately there's no way to do that.  If you had stock you could do a "collar" with options.  Mark Cuban did this w Yahoo stock ages ago


     
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BawsyBoss
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May 11, 2014, 03:39:07 AM
 #4

If I understood correctly, you could do this with a service such as btc.sx. I am not sure if it is still alive, since the founder hasn't come online in like 2 weeks or so.

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May 11, 2014, 03:54:18 AM
 #5

If you had stock you could do a "collar" with options.
No, a collar is where you hold the asset, but don't make or lose money if the price changes, which isn't what the OP wants. Though either strategy requires an options exchange, and there isn't one for bitcoins as far as I know.

If I understood correctly, you could do this with a service such as btc.sx.
Explain how. They only do leveraged trading as far as I can tell, not options.

Will pretend to do unverifiable things (while actually eating an enchilada-style burrito) for bitcoins: 1K6d1EviQKX3SVKjPYmJGyWBb1avbmCFM4
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May 11, 2014, 04:17:20 AM
 #6

If you had stock you could do a "collar" with options.
No, a collar is where you hold the asset, but don't make or lose money if the price changes, which isn't what the OP wants. Though either strategy requires an options exchange, and there isn't one for bitcoins as far as I know.

If I understood correctly, you could do this with a service such as btc.sx.
Explain how. They only do leveraged trading as far as I can tell, not options.

I thought he wanted his BTC to stay the same value in the future.  That's why I said collar.


     
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bumblebeee
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May 11, 2014, 04:18:36 AM
 #7

what do you mean lock the btc price?

you mean when to buy right?

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May 11, 2014, 04:34:06 AM
 #8

I thought he wanted his BTC to stay the same value in the future.  That's why I said collar.
But they're not his bitcoins. He sold them. He wants to buy them back at a guaranteed price in the future. Hence a call option is the way to go.

Will pretend to do unverifiable things (while actually eating an enchilada-style burrito) for bitcoins: 1K6d1EviQKX3SVKjPYmJGyWBb1avbmCFM4
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May 11, 2014, 04:42:35 AM
 #9

I thought he wanted his BTC to stay the same value in the future.  That's why I said collar.
But they're not his bitcoins. He sold them. He wants to buy them back at a guaranteed price in the future. Hence a call option is the way to go.

oh OK i was confused.  yeah buy a call at a $10 strike


     
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.
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BawsyBoss
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May 11, 2014, 05:17:05 AM
 #10

If you had stock you could do a "collar" with options.
No, a collar is where you hold the asset, but don't make or lose money if the price changes, which isn't what the OP wants. Though either strategy requires an options exchange, and there isn't one for bitcoins as far as I know.

If I understood correctly, you could do this with a service such as btc.sx.
Explain how. They only do leveraged trading as far as I can tell, not options.
Ok, then I guess I misunderstood what was going on. I'm not too well versed in these regards, so I'll stay away from this thread.

Forever strong.
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May 11, 2014, 07:43:37 AM
 #11

As far as I am aware, nobody offers a liquid options market of the kind you want
Futures yes, options no
Would love to hear if I am wrong as I might be interested in one myself

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May 11, 2014, 07:45:21 AM
 #12

I suppose you could try to find someone on the forum willing to take the other side of the options contract but don't know what enforceability thre would be if the 'loser' refused to discharge his obligation
Escrow maybe?

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May 11, 2014, 01:19:45 PM
 #13

What you want is a call option and a futures contract can't do it for you
tistoni
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May 11, 2014, 06:58:41 PM
 #14

Thanks a lot for the replies. I think I've managed to figure it out how to do what I want with something called binary options. Also, found a good website called btcoracle.com . It looks good (any scam reports so far?).
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May 11, 2014, 08:17:58 PM
 #15

that's one of the biggest bitcoin problem, the other is the size of the blackchain
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May 12, 2014, 03:42:54 AM
 #16

Thanks a lot for the replies. I think I've managed to figure it out how to do what I want with something called binary options.
You should realise that binary options are not true options. With a true option, you have the option of paying the strike price and getting your coins at any time. With a binary option, you never pay the strike price and instead the cost of the option is entirely in the premium, which is therefore much greater for binary options. You're risking a lot more money with binary options, especially if the bitcoin price at expiration is very close to the strike price.

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May 12, 2014, 06:52:38 AM
 #17

I think there is no way to make this happen,unless the price of bitcoin is high enough

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May 15, 2014, 03:47:36 PM
 #18

Yeah, binary options do not work. They also operate with really high profit margin.
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May 16, 2014, 02:47:47 PM
 #19

I think there is no way to make this happen,unless the price of bitcoin is high enough
why?

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May 17, 2014, 02:40:41 AM
 #20

Anyway, better search any exchange before you do any trade there. There are some complains on the one you mentioned. Of course, I'm not endorsing the complains.
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