XMR futures/options OTC thread

[Scott J]

My model is not B-S, it is "rpietila BS" 

The higher implied volatility in in-the-money calls is due to the options being American-style (B-S pricing method is valid for European options).

The much lower volatility in puts is due to my own bias in wanting the people to buy puts, because then I can only win - either I get cheap moneros or get to keep the premiums. With calls, my bullishness is visibly shown, and also the options pricing methods do not take into account the fat tail that is many times manifested with cryptos (10x or even 50x increases in a month).

Also it is possible for me to support the price from going down, but impossible to prevent it from going up.

Poloniex offers all historical trades as a data dump.

You say "impossible", but you could prevent it from going up if you sold some of your holdings.

I know you are a bull, but you might be inclined to do this short-term.

[rpietila]

this will become a lot more interesting when you are making market (buying as well as selling) and there are at least two expirations in play.  

you are sufficiently capitalized for now, but if you expose yourself more in future, do beware of insiders/hackers breaking your statistics.

anyhow, this is really great news for xmr.  rock on, sir.

Let's be real here, an actual market wouldn't let him offer ATM calls at a 300%+ vol premium to ATM puts.

If the actual market would offer calls with the same vol as I am offering puts, I'd be glad to buy them.

Why?

- As for the expensive calls, cryptocurrency is not a stock, its value has no upper bound. It can appreciate really quickly and go really high. The options pricing models have not been calibrated with crypto price datasets, which are heavily skewed to the fat tail to the upside.

- As for the cheap puts, it is quite disingenious to pretend that XMR price has a large downside risk, because it doesn't.

[rpietila]

My model is not B-S, it is "rpietila BS" 

The higher implied volatility in in-the-money calls is due to the options being American-style (B-S pricing method is valid for European options).

The much lower volatility in puts is due to my own bias in wanting the people to buy puts, because then I can only win - either I get cheap moneros or get to keep the premiums. With calls, my bullishness is visibly shown, and also the options pricing methods do not take into account the fat tail that is many times manifested with cryptos (10x or even 50x increases in a month).

Also it is possible for me to support the price from going down, but impossible to prevent it from going up.

Poloniex offers all historical trades as a data dump.

You say "impossible", but you could prevent it from going up if you sold some of your holdings.

I know you are a bull, but you might be inclined to do this short-term.

Selling in the early stages of an uptrend just does not pay off. I am anticipating a megamove that takes Monero to another decimal. Once we leave 0.004 we are not seeing it again. Selling valuable moneros at these peanuts price levels is never going to be worth it just to prevent the call holders from "making money" on their calls. If I keep the price below their strike, they can just buy the coins at an even cheaper price from me the manipulator, shooting my own foot in pursuit of imaginary gains.

Not to mention that my actual ability to influence the price down is very very much less than the potential to force it up. It is in direct correlation to the ratio of the market values of my BTC:XMR, which, despite all rumors, is still a large number 

[ArticMine]

First congratulations an an excellent initiative. As for pricing the calls, this really comes down to finding an underwriter willing to do this for a lower premium, under the same terms. Apart from the XMR's strength there is also the possibility of a sharp rise in XBT/USD leading to a sharp rise in XMR/XBT. Writing calls on XMR/XBT makes me very nervous in this market, but there may be others who are interested for a lower premium.

[rpietila]

First congratulations an an excellent initiative. As for pricing the calls, this really comes down to finding an underwriter willing to do this for a lower premium, under the same terms. Apart from the XMR's strength there is also the possibility of a sharp rise in XBT/USD leading to a sharp rise in XMR/XBT. Writing calls on XMR/XBT makes me very nervous in this market, but there may be others who are interested for a lower premium.

Yes, let the market work. After all you can easily be 100% covered, because it is a nobrainer that anyone interested in this business is anyway a big holder of both XMR and BTC. If for example I decide to write calls and they are bought in great quantities and become wildly profitable, I am happy to eat the "loss" of XMR going up since I was overweight in XMR anyway.

[bobabouey2]

I may be dense today, but I can not find the batch download function for all trading prices, just for my trades...

[rpietila]

I may be dense today, but I can not find the batch download function for all trading prices, just for my trades...

Busoni mentioned that it is possible to get somehow. Perhaps via an API call...

[Skinnkavaj]

OK I will be the first to take the risk of losing 1000 XMR by placing a call order.

I want to use 1000 XMR of my own and place a call on XMR/BTC reaching 0.01 before 31st of September.

You are giving away money rpietila.

[rpietila]

OK I will be the first to take the risk of losing 1000 XMR by placing a call order.

I want to use 1000 XMR of my own and place a call on XMR/BTC reaching 0.01 before 31st of September.

You are giving away money rpietila.

OK, you want to invest 1000 XMR in the option premium I presume. That is BTC3.96.

The contract 140930-CALL-0.0100 costs BTC0.00082 per XMR. 5 contracts for 5000 XMR would cost you BTC4.20. Since I am giving away money, I am willing to sell them to you for 1000 XMR.

So until September 30th, you have the right, but no obligation, to buy 5000 XMR from me at 0.01.

I originally did not want to start this yet before evaluating the comments and pricing, but hey, let's give it a go. If you are still serious about it, send a PM, and I will send my BTC/XMR address whichever you prefer!

[Skinnkavaj]

PM sent.

[bobabouey2]

My model is not B-S, it is "rpietila BS" 

The higher implied volatility in in-the-money calls is due to the options being American-style (B-S pricing method is valid for European options).

The much lower volatility in puts is due to my own bias in wanting the people to buy puts, because then I can only win - either I get cheap moneros or get to keep the premiums. With calls, my bullishness is visibly shown, and also the options pricing methods do not take into account the fat tail that is many times manifested with cryptos (10x or even 50x increases in a month).

Also it is possible for me to support the price from going down, but impossible to prevent it from going up.

Poloniex offers all historical trades as a data dump.

I understand your logic, and to avoid any doubt, I wasn't trying to criticize your pricing as unsound, I was just curious to see what the implied volatility was.  I trade equity options frequently, and it is one of the first things I look at to get a sense of option prices.

And as for Black Scholes on an American option, I think for calls it is generally considered to be applicable if there are no dividends.  And, in practice, since few options are exercised early, using it to approximate the implied volatility of an American put or call is common.

[rpietila]

I understand your logic, and to avoid any doubt, I wasn't trying to criticize your pricing as unsound, I was just curious to see what the implied volatility was.  I trade equity options frequently, and it is one of the first things I look at to get a sense of option prices.

Well guess who is in the receiving end if the pricing is unsound..

And as for Black Scholes on an American option, I think for calls it is generally considered to be applicable if there are no dividends.  And, in practice, since few options are exercised early, using it to approximate the implied volatility of an American put or call is common.

The high implied volatility for at-the-money CALLs, is the result of my model taking into account the observed monthly price cycle, combined with the fact that the option can be exercised early, leading to a much higher percentage of early exercise than typically observed (since this proposal of mine did not include aftermarkets, which naturally quench early exercise).

[luigi1111]

this will become a lot more interesting when you are making market (buying as well as selling) and there are at least two expirations in play.  

you are sufficiently capitalized for now, but if you expose yourself more in future, do beware of insiders/hackers breaking your statistics.

anyhow, this is really great news for xmr.  rock on, sir.

Let's be real here, an actual market wouldn't let him offer ATM calls at a 300%+ vol premium to ATM puts.

If the actual market would offer calls with the same vol as I am offering puts, I'd be glad to buy them.

Why?

- As for the expensive calls, cryptocurrency is not a stock, its value has no upper bound. It can appreciate really quickly and go really high. The options pricing models have not been calibrated with crypto price datasets, which are heavily skewed to the fat tail to the upside.

- As for the cheap puts, it is quite disingenious to pretend that XMR price has a large downside risk, because it doesn't.

There is no model I know of that can adequately accommodate such risk. The vol cannot exceed a certain amount (depending on expiration date). A call cannot be priced higher than the underlying.

I'm also not trying to "pretend" or assume anything in regards to price.

I'm only saying that, given the opportunity (i.e., an actual market), I would short combo you (+ my own long XMR of course) into oblivion (more likely until the price rose enough that you changed your put/call prices to be appropriate at the new ATM strike due to not anticipating as much upside anymore, given that the market is pretty illiquid).

[rpietila]

There is no model I know of that can adequately accommodate such risk. The vol cannot exceed a certain amount (depending on expiration date). A call cannot be priced higher than the underlying.

I'm also not trying to "pretend" or assume anything in regards to price.

I'm only saying that, given the opportunity (i.e., an actual market), I would short combo you (+ my own long XMR of course) into oblivion (more likely until the price rose enough that you changed your put/call prices to be appropriate at the new ATM strike due to not anticipating as much upside anymore, given that the market is pretty illiquid).

I fully understand that you are supporting my initiative of creating the options market, and I understand that you are not attacking me. I also understand that if there were a two-sided efficient market, the market would price the options, and every single actor would be a price-taker. Furthermore, despite that the notional value of 5000 XMR is already traded, I did not even intend the current prices to be actual or factual.

So I refuse to be offended. What you would do, could only happen in the circumstances where it could not happen. 

[luigi1111]

There is no model I know of that can adequately accommodate such risk. The vol cannot exceed a certain amount (depending on expiration date). A call cannot be priced higher than the underlying.

I'm also not trying to "pretend" or assume anything in regards to price.

I'm only saying that, given the opportunity (i.e., an actual market), I would short combo you (+ my own long XMR of course) into oblivion (more likely until the price rose enough that you changed your put/call prices to be appropriate at the new ATM strike due to not anticipating as much upside anymore, given that the market is pretty illiquid).

I fully understand that you are supporting my initiative of creating the options market, and I understand that you are not attacking me. I also understand that if there were a two-sided efficient market, the market would price the options, and every single actor would be a price-taker. Furthermore, despite that the notional value of 5000 XMR is already traded, I did not even intend the current prices to be actual or factual.

So I refuse to be offended. What you would do, could only happen in the circumstances where it could not happen.  

I know.  

I was not trying to offend or attack you, so we're on the same page there. I am more impressed there was a buyer already (and may be more out there?). I will follow with interest, and am quite possibly interested in offering my own options for sale if there's some deal that can be worked out.

[Scott J]

OK I will be the first to take the risk of losing 1000 XMR by placing a call order.

I want to use 1000 XMR of my own and place a call on XMR/BTC reaching 0.01 before 31st of September.

You are giving away money rpietila.

OK, you want to invest 1000 XMR in the option premium I presume. That is BTC3.96.

The contract 140930-CALL-0.0100 costs BTC0.00082 per XMR. 5 contracts for 5000 XMR would cost you BTC4.20. Since I am giving away money, I am willing to sell them to you for 1000 XMR.

So until September 30th, you have the right, but no obligation, to buy 5000 XMR from me at 0.01.

I originally did not want to start this yet before evaluating the comments and pricing, but hey, let's give it a go. If you are still serious about it, send a PM, and I will send my BTC/XMR address whichever you prefer!

Just to make sure I am not working this out incorrectly, I make 5 contracts for 5000 XMR BTC4.10 not BTC4.20.

5000 x 0.00082 = 4.10

Still well above the cost of 1000 XMR, however.

[rpietila]

Just to make sure I am not working this out incorrectly, I make 5 contracts for 5000 XMR BTC4.10 not BTC4.20.

5000 x 0.00082 = 4.10

Still well above the cost of 1000 XMR, however.

Sorry. I misremembered the office fee at BTC0.1 instead of the 10 XMR (=BTC0.0396). Luckily this time is was included in my discount anyway.

[rpietila]

Risto, are you able to calculate actual historical volatility from your dataset of historical trading prices of poloniex, or could someone point me to a source?  Poloniex only seemed to provide more recent trade data, and I don't know how to convert the graph information into data.

I ran a quick calculation based on the exhange history (the very beginnings at OTC omitted). The average of ABS(daily vwap change) was 11.97%, and since the number of trading days per year is 365, the annual volatility is 229%. Am I correct?

The using of vwap's, instead of closes, smoothens the ride, but that was all the data I had. For example the latest rally top was 0.00580, yet the vwap of the day was only 0.00505 (top was 14.9% higher).

It may be that 400%+ implied volatility is a bit steep, but let's leave it to the market. If somebody wants to write at 200%, I will be a buyer

Like I told earlier, the puts are cheap. But this is based on my own calculations about support levels, trendlines and such, which almost totally disregard the event of price dropping 50% in any timeframe, whereas the price rising 100% is a near certainty based on the fundamentals, and only a question of time. The PUT-CALL disparity will hold at least in my pricing, and you are free to punish me however you see fit (luigi1111!).

We already have 5000 XMR open interest, so perhaps I will continue and recalculate the prices for these options and add some 2-month ones as well.

[Scott J]

We already have 5000 XMR open interest, so perhaps I will continue and recalculate the prices for these options and add some 2-month ones as well.

2 month options would interest me.

[Skinnkavaj]

It is very good for everyone involved that rpietila is doing this.
PUT and CALL options is new to a lot of people, and many do not know how they work.
Let me try explain why it is good, a put option let you hedge yourself against a potentional crash in the XMR market. Since the upside is so great with XMR, and when you have the option to hedge yourself like this it is why I am joking with rpietila and saying he is giving away money. Because you can also place a CALL option like I did, and if you believe prices are going to rise (inevitable now), you can take advantage of the leverage rpietila is offering you by placing a CALL option.

If you still do not understand how this works, pm me and I will try answer them. I am also on freenode in #monero-dev and #monero.