Best way to hedge against BTC value movements. Bitcoin futures / options?

[thehun]

Let's say I want to have an "insurance" so that 1 or 2 days from now I'll be able to buy Bitcoins at today's price, paying a small premium for this insurance.

What is the best way to currently do so? I have been looking at several options on the market but I can't seem to find the solution yet:

- Icbit.se: unclear operation and as far as I can see, futures are for longer timespans (3-6 months away)
- 796.com: seems good with tight spreads but settlement is only once per week

Any other suggestions/strategies?

[1715128051]

1715128051

[1715128051]

1715128051

[1715128051]

1715128051

[whtchocla7e]

I can do better for you. I'll guarantee you Bitcoins at today's price 5 years from now with no fees.

[thehun]

I can do better for you. I'll guarantee you Bitcoins at today's price 5 years from now with no fees.

Not sure if this is serious, but what I'm looking for is actually short-term coverage (few days)

[Tron]

Try this:

https://www.predictious.com/economics

[thehun]

Try this:

https://www.predictious.com/economics

Thanks, but that seems like an "all or nothing" approach, more like gambling. What I need is an "option" to buy at a certain price.

[beetcoin]

sounds like something like this would be extremely complicated. you'd have to factor in your estimation of bitcoin's volatility and decide the rules on your "insurance" premium/benefits.

[keithers]

You basically need to just set up a contract with another person who is willing to hedge it for you.... that seems to be the easiest and cleanest way to do it...

[brian_23452]

In and of itself it isn't that hard to do at all (though naturally, in the absence of a large market for such instruments there would be some complications determining fair price\terms).
For example, you could give me (note this is an example, NOT an offer) say .2btc right now and I could contract with you to sell 1 bitcoin to you on or before 6-12-14 at say 660USD, at your prerogative.  The primary difficulty you would have with this is enforcing the terms of the contract.  Who is to say I would honor the agreement if bitcoin goes up to 700USD or more?  Who is to say I even have 1 bitcoin to sell you?  Securities markets have [in theory anyway] regulatory bodies to ensure these things, bitcoin obviously does not.

[Tron]

In and of itself it isn't that hard to do at all (though naturally, in the absence of a large market for such instruments there would be some complications determining fair price\terms).
For example, you could give me (note this is an example, NOT an offer) say .2btc right now and I could contract with you to sell 1 bitcoin to you on or before 6-12-14 at say 660USD, at your prerogative.  The primary difficulty you would have with this is enforcing the terms of the contract.  Who is to say I would honor the agreement if bitcoin goes up to 700USD or more?  Who is to say I even have 1 bitcoin to sell you?  Securities markets have [in theory anyway] regulatory bodies to ensure these things, bitcoin obviously does not.

I agree with Brian.  This will need to be a two way market.

Because someone (or software) will need to ensure fulfillment of the contract, a third-party will need to act as an escrow agent.  In the future, that role will be automated by 'smart' contracts that fulfill the terms of the contract automatically.  It is possible to fully automate this process where both sides agree on the terms, the option is paid (.2btc in the above example), the 1 bitcoin is deposited and held in escrow with multi-sig securing the funds until the expiration of the option, and the funds automatically released upon payment by the option holder during the predetermined time, or released back to the option seller upon expiration of the option.

A decentralized version of this will exist in the not too distant future.

[TopherB]

Let's say I want to have an "insurance" so that 1 or 2 days from now I'll be able to buy Bitcoins at today's price, paying a small premium for this insurance.

What is the best way to currently do so? I have been looking at several options on the market but I can't seem to find the solution yet:

- Icbit.se: unclear operation and as far as I can see, futures are for longer timespans (3-6 months away)
- 796.com: seems good with tight spreads but settlement is only once per week

Any other suggestions/strategies?

While the blockchain protocol seems to contain all the needed functionality (not that I am even close to an expert) to make short and put options a reality as far as I know no exchange has yet implemented options. I've been waiting for this myself as I think it would remove a lot of volatility from the value of bitcoin by letting investors limit their exposure.

A lot of people that want bitcoin to only be a currency are against such features being developed. I think lowered volatility is vital to it being more accepted as a currency.

[LiteCoinGuy]

maybe this?

https://icbit.se/

[LiteCoinGuy]

or btc.sx ?

[Ron~Popeil]

Just jump in. The water is fantastic and will only get better.

[TheAccountant]

I agree with Brian.  This will need to be a two way market.

Because someone (or software) will need to ensure fulfillment of the contract, a third-party will need to act as an escrow agent.  In the future, that role will be automated by 'smart' contracts that fulfill the terms of the contract automatically.  It is possible to fully automate this process where both sides agree on the terms, the option is paid (.2btc in the above example), the 1 bitcoin is deposited and held in escrow with multi-sig securing the funds until the expiration of the option, and the funds automatically released upon payment by the option holder during the predetermined time, or released back to the option seller upon expiration of the option.

You don't necessarily need someone in the middle, unless one side or the other doesn't meet their contractual obligation.  If I agree to buy your bitcoin today and to sell them back to you on Monday at the same price, I am agreeing to take the risk that the price drops between now and then.  Escrow would be safer for both of us, but it isn't required to contract.

To the OP, I'm not sure why you'd want or need to do a hedge unless you knew you had a bitcoin denominated transaction coming up.  With the current volatility, I doubt anyone is currently pricing their goods or services in bitcoins. 

[crypt0dude]

*Necro to avoid new thread*. I'm also interested in (put) options. Any updates so far? If so, what is your experience with which service? Thanks.

[Dude.Lebowski]

Let's say I want to have an "insurance" so that 1 or 2 days from now I'll be able to buy Bitcoins at today's price, paying a small premium for this insurance.

What is the best way to currently do so? I have been looking at several options on the market but I can't seem to find the solution yet:

- Icbit.se: unclear operation and as far as I can see, futures are for longer timespans (3-6 months away)
- 796.com: seems good with tight spreads but settlement is only once per week

Any other suggestions/strategies?

Bitmex.com has exactly the right tools to do this. They also have many blog post examples about how to hedge with their system.

I too am learning but I have a hard time understanding.

However, through my research bitmex seems to be the best place to do this.

[adaseb]

Just sell and buy tether and keep that in your cold storage.

[stompix]

Just sell and buy tether and keep that in your cold storage.

Bright idea...
Buy a scamcoin and keep it in storage until it's worth 2 cents if you're lucky.

As for others looking for the same solution as the op probably bitmex.com is the choice.
At least they are 3 years old without getting "hacked".

[keithers]

Diversification is definitely the key to hedge against BTC value movements.   Sometimes I am bad at taking my own advice.   Like for instance, I have turned decent profits on some alt-coins, and then just converted those alt-coins back into Bitcoin when I felt the time was right (or if I hit my goal in profit).

My advice would be to learn as much as you can about each thing you are potentially investing in, and then go long on all of them. 

I would also suggest putting money in stocks/mutual funds and especially real estate (if you can afford to do so).   You never want all your eggs in one basket.

The goal is to have your money working for you, so the more income streams you have, the better (obviously).  The more things you are invested in, the better off you should be (stability-wise) at least.

[adaseb]

Just sell and buy tether and keep that in your cold storage.

Bright idea...
Buy a scamcoin and keep it in storage until it's worth 2 cents if you're lucky.

As for others looking for the same solution as the op probably bitmex.com is the choice.
At least they are 3 years old without getting "hacked".

They are both not full-proof. Keeping it on an exchange is risky also since it can be hacked. Tether you can at least cold storage.