[ANN] Coinut.com - The only Bitcoin Options Exchange [beta]

[chriswen]

Did we scare off the market maker?

This is my concern:

In the interview it was mentioned that Coinut was capitalized out of the founder's pockets in the amount US$100k. If in fact they are the primary market maker, and their 'modified Black-Scholes model' doesn't work well with Bitcoin in the short-medium term, I could see Coinut burning cash quickly ... and then all bets are off.

Just understand that when you deposit and trade here, there are many more risks involved than simply where the bitcoin price is headed. As Chris mentioned there are currently no quotes for the binary options except for the nearest 30-min and 1-hr contracts ...

I'm quite sure that they have third party market makers.

A few weeks ago the market maker's bot for the daily contract had some serious malfunctions and I was able to ramp up 1 BTC to 22 BTC at expiry. It was quite a grave concern for them. I could have withdrawn, but wangxinxi acted as an intermediary and asked if I could give the marketmaker another chance. 22 BTC was quite a lot for that marketmaker and coinut doesn't have that much volume at the time. So he said the marketmaker was offering a bounty. I made a counter offer and asked for a bit more. And well the market maker agreed.

Well, it seems like he decided to leave now. Coinut has different market makers on the 30 minute and the vanilla options. Actually I believed the weekly, and biweeklies was using a different market maker also. They offer incentives to the market makers for providing liquidity but if the market makers don't feel like it they can stop market making. Now Coinut is going to need to find some new market makers.

Maybe, I should have been betting less and work on bringing in new users first. Now it's going to be hard with a market maker MIA.

Or it could be that the market maker had some sort of trigger that shut down their system. Maybe the markets are just too volatile right now for them to make markets currently.

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[chriswen]

If Coinut is the market maker, they can very easily manipulate the price index to work against the major money so that Coinut profits on every trading window.  No point in investing until the market maker identity is known.  I have asked many times, and find it dubious at best that Coinut refuses to identify the market maker.  Transparency is key in these new marketplaces, and without the transparency, Coinut very well could be the market maker, as well as the price index setter, which has been pointed out in prior posts as a major concern

The price index is based on the bid and ask for bitfinex, bitstamp, and btc-e.

I've talked to them and while they don't disclose the identities of the market makers, I believe that they're separate identities.

Bitmex has marketmakers too and they aren't known. I think they have no obligation to disclose who their market makers are.

[chriswen]

So really it boils down to the price index.

I think to promote transparency coinut should have a page with a chart for the historical index prices.

That'll promote transparency because you'll know the historical settlement prices. You'll be able to check those numbers. And you'll also be able to check if the historical index matches your exercise price.

Secondly Coinut should add a page with all their current price inputs, similar to okcoin.

https://www.okcoin.com/marketList.do

So then you could verify their live data and their live index to see if it matches up.

[Indamuck]

I'm quite sure that they have third party market makers.

A few weeks ago the market maker's bot for the daily contract had some serious malfunctions and I was able to ramp up 1 BTC to 22 BTC at expiry. It was quite a grave concern for them. I could have withdrawn, but wangxinxi acted as an intermediary and asked if I could give the marketmaker another chance. 22 BTC was quite a lot for that marketmaker and coinut doesn't have that much volume at the time. So he said the marketmaker was offering a bounty. I made a counter offer and asked for a bit more. And well the market maker agreed.

Well, it seems like he decided to leave now. Coinut has different market makers on the 30 minute and the vanilla options. Actually I believed the weekly, and biweeklies was using a different market maker also. They offer incentives to the market makers for providing liquidity but if the market makers don't feel like it they can stop market making. Now Coinut is going to need to find some new market makers.

Maybe, I should have been betting less and work on bringing in new users first. Now it's going to be hard with a market maker MIA.

Or it could be that the market maker had some sort of trigger that shut down their system. Maybe the markets are just too volatile right now for them to make markets currently.

It seems quite problematic to simply apply black-scholes to bitcoin, given the wild swings in volatility. Bitcoin was built for volatility. You might say it was built to break black-scholes. Market maker has to be either very seasoned, or very deep pockets to make this work. Coinut is NEITHER seasoned NOR deep pockets. They are PHd students getting carried away with their thesis ... lol. I'm hoping this works ... but I'm not overwhelmed by the odds.

Btw, nice score Chris. Apparently you were paying closer attention than me ... Do you mean to say you gave some of your profits back to the market maker?!?

[chriswen]

I'm quite sure that they have third party market makers.

A few weeks ago the market maker's bot for the daily contract had some serious malfunctions and I was able to ramp up 1 BTC to 22 BTC at expiry. It was quite a grave concern for them. I could have withdrawn, but wangxinxi acted as an intermediary and asked if I could give the marketmaker another chance. 22 BTC was quite a lot for that marketmaker and coinut doesn't have that much volume at the time. So he said the marketmaker was offering a bounty. I made a counter offer and asked for a bit more. And well the market maker agreed.

Well, it seems like he decided to leave now. Coinut has different market makers on the 30 minute and the vanilla options. Actually I believed the weekly, and biweeklies was using a different market maker also. They offer incentives to the market makers for providing liquidity but if the market makers don't feel like it they can stop market making. Now Coinut is going to need to find some new market makers.

Maybe, I should have been betting less and work on bringing in new users first. Now it's going to be hard with a market maker MIA.

Or it could be that the market maker had some sort of trigger that shut down their system. Maybe the markets are just too volatile right now for them to make markets currently.

It seems quite problematic to simply apply black-scholes to bitcoin, given the wild swings in volatility. Bitcoin was built for volatility. You might say it was built to break black-scholes. Market maker has to be either very seasoned, or very deep pockets to make this work. Coinut is NEITHER seasoned NOR deep pockets. They are PHd students getting carried away with their thesis ... lol. I'm hoping this works ... but I'm not overwhelmed by the odds.

Btw, nice score Chris. Apparently you were paying closer attention than me ... Do you mean to say you gave some of your profits back to the market maker?!?

Yeah I returned the a big chunk of the profits. 20 BTC would've been nice. It was right when they released the volume indicators. The marketmaker would switch from buying put options at 0.00875 to selling put options deep in the money for cheap or something like that. And then it would switch back so that you can sell some back to raise my capital so I could do more each time.

Anyways the marketmaker wasn't too happy about that. And well they were going to leave so I gave some back, since I really wanted the platform to grow. But it looks like they left anyways.

As for black scholes, I think 30 minute pricing makes sense. Even the cheap options, if you keep buying them during a flat market, bitcoin can actually stay flat. And they lose money that one time there's volatility but then the pricing will change.

Also I was wondering about weeklies and biweeklies. They're actually quite expensive for out of the money options. I think you should be able to hedge it especially if you sell binary options on a wide range of strikes.

Btcoracle uses some sort of trading engine to do their odds.

I also think if you're marketmaking you should dynamically price based on demand, to help hedge your position. Also if everyone's buying call options you make them more expensive. That helps reduce exposure.

[Indamuck]

Yeah I returned the a big chunk of the profits. 20 BTC would've been nice. It was right when they released the volume indicators. The marketmaker would switch from buying put options at 0.00875 to selling put options deep in the money for cheap or something like that. And then it would switch back so that you can sell some back to raise my capital so I could do more each time.

Anyways the marketmaker wasn't too happy about that. And well they were going to leave so I gave some back, since I really wanted the platform to grow. But it looks like they left anyways ...

Sounds like a simple case of inexperience on the market maker's part. Or, that may have been a minor thing, and they left for other reasons. Anyway, I'm trading futures for the time being ... hope Coinut can pull this together.

It's funny. Mr. Wang was over on the Gambling sub-forum here touting how someone made over 20 btc. Does it really count if you gave it back? Lol ...

[chriswen]

Yeah I returned the a big chunk of the profits. 20 BTC would've been nice. It was right when they released the volume indicators. The marketmaker would switch from buying put options at 0.00875 to selling put options deep in the money for cheap or something like that. And then it would switch back so that you can sell some back to raise my capital so I could do more each time.

Anyways the marketmaker wasn't too happy about that. And well they were going to leave so I gave some back, since I really wanted the platform to grow. But it looks like they left anyways ...

Sounds like a simple case of inexperience on the market maker's part. Or, that may have been a minor thing, and they left for other reasons. Anyway, I'm trading futures for the time being ... hope Coinut can pull this together.

It's funny. Mr. Wang was over on the Gambling sub-forum here touting how someone made over 20 btc. Does it really count if you gave it back? Lol ...

Well he said 10 btc on twitter.

[chriswen]

So orders are now back.

WangXinXi we need an explanation.

[Indamuck]

So orders are now back.

WangXinXi we need an explanation.

Its a brand new site and they and their partners are still ironing out the wrinkles. I don't need more than that.

Every hurdle they overcome makes them more robust. Nice ...

[CoinutScam]

Definitely will need an explanation.  What sort of benefits do market makers enjoy?  Would potentially be interested if some technical fixes were made and the conditions were correct

[wangxinxi]

Hi guys, sorry for the recent shortage of liquidity for some of the binary options. One of the market makers felt it was too risky due to the big fluctuations a few days ago. But now we have discussed with him and he just turned back, and he promised not to do so in the future and he is also improving the market making program to make it more robust. Anyways, we will try our best to find more and more good market makers for you guys to trade with.

BTW, for vanilla options, we will release straddle or strangle shortly, so you can directly short or long volatility. Stay tuned!

[wangxinxi]

For some of you who don't know how to call me, you can call me Xinxi (my Chinese given name), Andy (my English name), Mr. Wang, or Dr. Wang (yes, I have graduated already and I've been working on this fullltime for about one year ).

[chriswen]

Hi guys, sorry for the recent shortage of liquidity for some of the binary options. One of the market makers felt it was too risky due to the big fluctuations a few days ago. But now we have discussed with him and he just turned back, and he promised not to do so in the future and he is also improving the market making program to make it more robust. Anyways, we will try our best to find more and more good market makers for you guys to trade with.

BTW, for vanilla options, we will release straddle or strangle shortly, so you can directly short or long volatility. Stay tuned!

Yeah these additional options will be interesting.

I sort of like trading in one direction and picking two directions takes even longer to break even but I'm sure this will be nice for some people.

Also if you're interested in shorting this is really useful because instead a maximum of 40% margin requirement you'll only require a maximum of 20% margin.

Also it seems like he really did make some changes to the program. I bought 125 binary options for biweekly and now premiums are jacked up. But he didn't exactly price the puts better.

[Indamuck]

Hi guys, sorry for the recent shortage of liquidity for some of the binary options. One of the market makers felt it was too risky due to the big fluctuations a few days ago. But now we have discussed with him and he just turned back, and he promised not to do so in the future and he is also improving the market making program to make it more robust. Anyways, we will try our best to find more and more good market makers for you guys to trade with.

BTW, for vanilla options, we will release straddle or strangle shortly, so you can directly short or long volatility. Stay tuned!

Hi Andy,

Hope you can build some flexibility into your strangle/straddle margining regime.

For example, I may sell puts today, and then sell calls for the same expiration a few days later. I would like to get straddle or portfolio margining on the position, as only one half of the position can expire in-the-money. Currently you are charging us 2x the required margin. I would be trading a lot more if you had this, and that probably holds true for many of your other customers as well.

[chriswen]

Hi guys, sorry for the recent shortage of liquidity for some of the binary options. One of the market makers felt it was too risky due to the big fluctuations a few days ago. But now we have discussed with him and he just turned back, and he promised not to do so in the future and he is also improving the market making program to make it more robust. Anyways, we will try our best to find more and more good market makers for you guys to trade with.

BTW, for vanilla options, we will release straddle or strangle shortly, so you can directly short or long volatility. Stay tuned!

Hi Andy,

Hope you can build some flexibility into your strangle/straddle margining regime.

For example, I may sell puts today, and then sell calls for the same expiration a few days later. I would like to get straddle or portfolio margining on the position, as only one half of the position can expire in-the-money. Currently you are charging us 2x the required margin. I would be trading a lot more if you had this, and that probably holds true for many of your other customers as well.

Andy, this is a good use case for the straddle.

Note that in this case they're not doing the straddle at the beginning. Since you're making this feature already, make it so that the strikes can be set apart. Also you don't need to place the orders at the same time. You can combine them after the fact to get the cheaper margin. You can also uncombine them if you want to close one part of the straddle whenever.

[wangxinxi]

Hey guys, just made the option chain sheet much more readable. No more annoying scrolling. Just choose to show 5, 10, or 15 strikes. Enjoy trading!

[chriswen]

Interesting change, 20 list is a bit small.

Ah just made a retarded trade and donated 1+ BTC to the 30 min marketmaker.

[ssstand]

hi i transfer some btc to my account, but my balance still shows 0.0 after 30 minutes,
how much time it takes to process ? Thanks.

my account is ssstand

[chriswen]

hi i transfer some btc to my account, but my balance still shows 0.0 after 30 minutes,
how much time it takes to process ? Thanks.

my account is ssstand

Well transactions are taking awhile to confirm because of blocks being full. Did you have a fee?

Coinut requires 3 confirmations which usually takes half an hour. This is not always the case and it make take longer than that due to variance.

[Indamuck]

Interesting change, 20 list is a bit small.

Ah just made a retarded trade and donated 1+ BTC to the 30 min marketmaker.

You are going to ask for a refund, right? Lol ...