Selling call options on your bitcoins

[right wing authoritarian]

Hi All

I wanted to start selling call options over bitcoins.

It seems that people have tried this before and it is not gone well but I see no reason why it should not work if done properly.

Would appreciate input as to why this might be a bad idea.

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[wenben]

You need to have counter party and someone foolish enough to buy the call.

And how much collateral are you willing to put up for selling the call option?

[Este Nuno]

How would you go about doing this exactly?

Is there some sort of market infrastructure already in place to allow this?

[galbros]

I think this is a great idea.  Just like any securities market you need some confidence that both parties will honor the deal, e.g. escrow.

So for example, one party pays X for the right to buy a bitcoin form you next month for (say) 600 USD, has to have confidence that you will honor that deal if the bitcoin is at 650 USD.

I would think an exchange could do this fairly easily, they would just encumber your bitcoin balance until the option expired or was exercised.  Of course, the exchanges has to be honest and reliable.... (Yes I'm looking at the grave of Mt. Gox)

Good Luck!

[CurbsideProphet]

Hi All

I wanted to start selling call options over bitcoins.

It seems that people have tried this before and it is not gone well but I see no reason why it should not work if done properly.

Would appreciate input as to why this might be a bad idea.

For one, the user name you chose is pretty poor.  It's like sending in a resume for a job and listing your contact info as suckmyballz@gmail.com

[right wing authoritarian]

So taking into account initial feedback I guess I would have to put sufficient bitcoin with an escrow so that the option holder had confidence that the call would be honoured. So as long as the buyer trusts the escrow then it should work regardless of whether people like my name or not.

Does anyone think that people would be interested. If you want to be long bitcoin it may be better for individuals to hold an option, depending on your risk preferences and what you want to use your money for. I would basically be sacrificing my upside but gaining some income now.

I am not really interested in setting up a market or anything so it would just be a private agreement mediated by an escrow.

[2dogs]

So taking into account initial feedback I guess I would have to put sufficient bitcoin with an escrow so that the option holder had confidence that the call would be honoured. So as long as the buyer trusts the escrow then it should work regardless of whether people like my name or not.

Does anyone think that people would be interested. If you want to be long bitcoin it may be better for individuals to hold an option, depending on your risk preferences and what you want to use your money for. I would basically be sacrificing my upside but gaining some income now.

I am not really interested in setting up a market or anything so it would just be a private agreement mediated by an escrow.

Once you have your buyer of the call, I think this might be the platform?
(and I would be the agent?)
https://bitcointalk.org/index.php?topic=714005.0

[SunBin]

There is already a future margin and margin exchange offering leverage to traders.

[2dogs]

There is already a future margin and margin exchange offering leverage to traders.

Bitfinex offers margin leverage - 2.5 X, IIRC.
Not exactly the type of action an option play would bring.
Not suggesting Bitfinex either, total return swaps are a recent concern:

https://bitcointalk.org/index.php?topic=667105.300

https://bitcointalk.org/index.php?topic=713722.0

I'd be interested in selling calls on DRK.
(There's always betmoose.com, I suppose )

[gmx95]

There is already a future margin and margin exchange offering leverage to traders.

There are also a few binary options for btc offered by various brokers.

[blumangroup]

There is already a future margin and margin exchange offering leverage to traders.

This is still not the same as buying options. Options will provide a speculator massive leverage (often several hundred "x") in the event the market moves in his favor, while limiting his downside to his initial investment in all scenarios. Margin on the other hand offers a small amount of leverage, but a speculator can lose his initial investment and all of the money that he borrowed to finance his position.

[TwinWinNerD]

I offered such a service here: https://bitcointalk.org/index.php?topic=557743.0

but there was nearly no interest for it, even though it was with 100% collateral in escrow.

[TheGull]

I would be an interested buyer (at the right price of course) if it could be done properly. The idea of the full balance of coins in escrow (as per TwinWinNerD's proposal) works. In the options world this is called a "covered call" because you are selling the right to buy an asset which you already hold so your obligation is covered.

Even if the interest is not there yet, it will come. This is a necessary part of any developed financial eco system. It also opens up massive potential for hedging bitcoin to USD for payment processors and companies accepting bitcoin.

[TwinWinNerD]

I am still very much open to writing call options (covered) for shorter terms (at max. 1 month). Just PM me or reply in the other thread and we can work something out.

(will probably only reply tomorrow though)

[2dogs]

Twin,

You are willing to write a covered call - isn't the OP wanting to sell a call?

Aren't you both bearish - on the same side of the trade?

[TwinWinNerD]

Twin,

You are willing to write a covered call - isn't the OP wanting to sell a call?

Aren't you both bearish - on the same side of the trade?

Yes. I wasnt responding to Op but to TheGull

[right wing authoritarian]

Twin,

You are willing to write a covered call - isn't the OP wanting to sell a call?

Aren't you both bearish - on the same side of the trade?

Yes. I wasnt responding to Op but to TheGull

Actually I would also be willing to buy at the right price, I am not bearish or bullish per say I just think it is a pity that such a volatile asset as bitcoin does not have an active options market.

[right wing authoritarian]

I would be an interested buyer (at the right price of course) if it could be done properly. The idea of the full balance of coins in escrow (as per TwinWinNerD's proposal) works. In the options world this is called a "covered call" because you are selling the right to buy an asset which you already hold so your obligation is covered.

Even if the interest is not there yet, it will come. This is a necessary part of any developed financial eco system. It also opens up massive potential for hedging bitcoin to USD for payment processors and companies accepting bitcoin.

Let us know what size call you might be interested in buying and over what time period. I will have a go at pricing the option and if we can agree on a fair value then we can deal or maybe TwinWinNerD and I can take half the action each.

[arbitrage001]

I am still very much open to writing call options (covered) for shorter terms (at max. 1 month). Just PM me or reply in the other thread and we can work something out.

(will probably only reply tomorrow though)

Covered call is same as naked put.

If you are trying to benefit from the interest portion, you can check out ICBIT on future contract.

[right wing authoritarian]

I am still very much open to writing call options (covered) for shorter terms (at max. 1 month). Just PM me or reply in the other thread and we can work something out.

(will probably only reply tomorrow though)

Covered call is same as naked put.

If you are trying to benefit from the interest portion, you can check out ICBIT on future contract.

How is a covered call the same as a naked put?