[Buying] Put options at 2.00 USD

[Ian Maxwell]

I am looking for the option to put 200-500 BTC at strike price $2.10 each, expiry July 31 (negotiable), premium $0.10 $0.15 each (also negotiable). European style is acceptable. Message me to "buy it now," or make a counter-offer here.

[demonofelru]

I am looking for the option to put 200-500 BTC at strike price $2.10 each, expiry July 31 (negotiable), premium $0.10 each (also negotiable). European style is acceptable. Message me to "buy it now," or make a counter-offer here.

I've had luck with you so I might be interested but the premium is way too low.  I learned my lesson well at how crazy volatility can be.


Edit: How about strike price of 2.10 expiry July 31st premium of .20 and european style?

[FreeMoney]

So if Bitcoins are worthless but still movable this is good for put buyer. But if they are worthless because they are stuck the put is worthless. Is this right?

[demonofelru]

So if Bitcoins are worthless but still movable this is good for put buyer. But if they are worthless because they are stuck the put is worthless. Is this right?

What did you mean by this?  AFAIK even in stocks if the company goes bankrupt the holder of the put can still exercise the option.

[FreeMoney]

So if Bitcoins are worthless but still movable this is good for put buyer. But if they are worthless because they are stuck the put is worthless. Is this right?

What did you mean by this?  AFAIK even in stocks if the company goes bankrupt the holder of the put can still exercise the option.

Maybe I'm off, or maybe there are different kinds. I assumed this deal implied that Sun wanted the right to sell bitcoins to the issuers of the put for $2 each. Doesn't he have to be able to deliver coins for that?

I suppose it could be done synthetically. Like just pay the difference of $2 and the Mtgox price at expiry, but that would involve specifying a method (bid price/ask price? what to do if mtgox is gone, etc).

[demonofelru]

So if Bitcoins are worthless but still movable this is good for put buyer. But if they are worthless because they are stuck the put is worthless. Is this right?

What did you mean by this?  AFAIK even in stocks if the company goes bankrupt the holder of the put can still exercise the option.

Maybe I'm off, or maybe there are different kinds. I assumed this deal implied that Sun wanted the right to sell bitcoins to the issuers of the put for $2 each. Doesn't he have to be able to deliver coins for that?

I suppose it could be done synthetically. Like just pay the difference of $2 and the Mtgox price at expiry, but that would involve specifying a method (bid price/ask price? what to do if mtgox is gone, etc).

Oh so you're saying the possibility of a huge exploit in bitcoins that would render them unable to be transfered I guess?  Yeah didn't thin of that.

[FreeMoney]

Yeah, I mean not likely, but still.

[Ian Maxwell]

If bitcoins aren't movable I'll mail you a disk holding my wallet file. I am collecting on these options if the value sinks.

I don't really expect it to in the next 90 days, this is just insurance.

[ribuck]

My offer:

Strike price of 2.10 expiry July 31st premium of .19 each, European style. Minimum quantity 500, maximum quantity 1000.

[demonofelru]

hehe I'll go Strike price of 2.10 expiry July 31st premium of .18 each, European style. any quantity you want, within reason, I won't be able to buy 1,000,000 BTC lol

[Ian Maxwell]

My original offer is getting better: exchange rate has hit all time highs in the last hour. I'm revising my "buy it now" offer to 0.15.

ribuck, I don't actually have 500 BTC at the moment, but I may still take 500 in options as long as I can exercise only part of that if necessary.

[demonofelru]

My original offer is getting better: exchange rate has hit all time highs in the last hour. I'm revising my "buy it now" offer to 0.15.

ribuck, I don't actually have 500 BTC at the moment, but I may still take 500 in options as long as I can exercise only part of that if necessary.

I'd be willing to do a european style one for .15 expiry july 31 2011 how many options would you want?

Edit: BTW I assume you got the coins last night?

Edit 2: So I guess buy it now as long as you are ok with European.

[Ian Maxwell]

@demonofelru: Sounds good. I'll take up to 500 BTC worth (making a $75 premium), as long as you're willing to let me exercise only part of that. (The only way this could work against you if bitcoins are simultaneously low-value and hard to buy, which seems unlikely---but I'd like a fully general hedge.)

I'm low on Mt Gox dollars, so the easiest payment method for me will be ACH push. Send me a message  letting me know if this is acceptable. I may not answer for a while since I ought to be working right now. 

An interesting sidenote: We are basically agreeing that there's a 7.5% chance Bitcoin will be worth less than $2 on July 31. I said 5.5% chance before and folks thought that was too low. Does this seem right?

Also interesting, to me anyway: With the closing of this trade I have officially broken even. 

[error]

Sorry to barge in, but can somebody explain this in VERY simple terms so that an average idiot like me can understand it?

[demonofelru]

Sorry to barge in, but can somebody explain this in VERY simple terms so that an average idiot like me can understand it?

The put option gives him the right but not the obligation to sell bitcoins to me at 2.10 per coin.  He's doing this as an insurance in case bitcoin dramatically loses value he would still be able to sell it for 2.10 even if mtgox is selling for 60 cents.  I did it because I feel the chance is slim that bitcoin value will dramatically deteriorate by July 31st and if I'm right I collect the premium which is mine to keep.  The premium is .15 per BTC and each contract is for 100 BTC so 5 contracts would give me $75 immediately.  If I'm right and on July 31st the price is for example $3 the option expires and I keep the $75.  If on July 31st the price is $1.95 I break even since I will buy the BTC for 2.10 but I got the 15 cents per BTC for the premium.  If the price is $1 on July 31st I am forced to buy the BTC at 2.10 each meaning a loss of 95 cents a BTC which would be a total loss of $475.  This probably isn't very simple but I tried lol

[Ian Maxwell]

Sure, I'll explain it. (I see demonofelru beat me to it, but maybe two explanations are better than one.)

I am buying a put option. This is a contract that gives me the right, but not the obligation, to sell bitcoins on some later date at a previously agreed-upon price, called the strike price---in this case, $2.10 per bitcoin.

This price isn't very good for me at the moment, but there's no saying for sure whether it will be on July 31. If the market price is below $2.10, I'll probably exercise my options and make the sale, and if it isn't, I probably won't. So I win either way---my bitcoins are basically insured against loss of value.

In consideration for this insurance, I'm paying a premium up front---in this case, $0.15 per bitcoin. demonofelru is taking on a risk and has decided this is enough to make it worth his while.

In this case, the later date, or expiry, is July 31. "European style" just means that I can't exercise my options early, I have to wait until July 31 and decide---compare to "American style," where I can exercise my options at any time until they expire.

[demonofelru]

Wait so the strike price is $2.00? Because your original post said "strike price $2.10 each"  not that I would complain less potential risk for me lol

[Ian Maxwell]

No, it's definitely $2.10---I keep thinking it's $2.00 because that was what I had in mind when I started the thread (as its title indicates), but I changed my mind in the process of writing the first post.

[demonofelru]

No, it's definitely $2.10---I keep thinking it's $2.00 because that was what I had in mind when I started the thread (as its title indicates), but I changed my mind in the process of writing the first post.

Hehe ok BTW your's was better then mine I'm not good at explaining options.

[error]

Perfect explanations, both of you. Thanks!