[ANN] Trade Bitcoin Options - BitcoinOPX.com [NOW OPEN]

[BitcoinOPX]

Hello BitcoinOPX,

now I've toyed around a bit with your site. Looks great this far. Had no problems using it.
I've found some minor or technical issues, I've emailed you those to your support email address.

I'd like to add some notes regarding usability.

(1) Creating options is a bit hidden. If I'm right, its only accessible via "my account". Well thats arguable;
     probably your reasoning was that people more often buy/sell options, then creating options themselves.

(2) Regarding support for people not so familiar with options. How about integrating some kind of calculator,
     or at least displaying an effective base price? For example: If I create an call-10 option @ $4 and then offering
     it for sale at $11.5, then what I'm doing effectively is to sell 10 BTC at a rate of 5.15 -- well, actually I hope
     to do such a deal, and I'll plan it for a future day.

Basically people familiar with trading handle numbers almost intuitively and / or use a calculator frequently. But hey,
why do we have computers today? Why shall I do number crunching in my head or use an external calculator, when
a nifty little javascript could do the calculations for me right in the webpage? Just my €0.02

-- Ichthyo

Thanks for the feedback!

Regarding point #1 you are right. I'll look at expanding the placement of the create option link. On point #2 I agree also. There should be some kind of default calculation done.

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[nrd525]

You might want to verify email addresses.

You might want to delete the event calendar as it is clutter.  Unless you plan on holding online trading workshops or other events that are very strongly connected to bitcoin option trading.

[nrd525]

I placed an order for a negative quantity at a negative price.

[Ichthyo]

.... How about integrating some kind of calculator,
     or at least displaying an effective base price? For example: If I create an call-10 option @ $4 and then offering
     it for sale at $11.5, then what I'm doing effectively is to sell 10 BTC at a rate of 5.15 -- well, actually I hope
     to do such a deal, and I'll plan it for a future day.

Basically people familiar with trading handle numbers almost intuitively and / or use a calculator frequently. But hey,
why do we have computers today? Why shall I do number crunching in my head or use an external calculator, when
a nifty little javascript could do the calculations for me right in the webpage?

Regarding point #1 you are right. I'll look at expanding the placement of the create option link. On point #2 I agree also. There should be some kind of default calculation done.

Hello,

expanding on that idea: especially, if such an embedded calculator could also include the fees, then this feature would start being helpful beyond just being a convenience. Especially regarding the 10 BTC options, the fee is actually a quite considerable factor.

Another usability related proposal: When I create a buy / sell offer, "confirm" brings me to a page showing all the details, including that fee. Well, if I now decide that my choosen limit wasn't appropriate, factoring in also the fee, then there is no way just to correct my order. All I can do is to "cancel", which discards all the values in the form. This is especially annoying when I entered that order values by clicking on the link "sell to open" after having created a new option. Because then I have to go back to "my account" and click that link again, and then recall the corrected limit price. Of course this isn't a real obstacle, but it isn't a smooth experience either.

-- Ichthyo

[BitcoinOPX]

You might want to verify email addresses.

You might want to delete the event calendar as it is clutter.  Unless you plan on holding online trading workshops or other events that are very strongly connected to bitcoin option trading.

Both probably good ideas.

[BitcoinOPX]

I placed an order for a negative quantity at a negative price.

LOL  

Thanks, definitely a bug.

[ArticMine]

what was not entirely clear:

will you yourself be the counterparty in this trade?
or are you also matching buyers+sellers but for options?

Thanks for the question.

Things are not set up for me to be a counterparty, but I could be. The system simply lets anyone create an option then sell it on the open market. Let me walk through an example. You are user-A and I am user-B.

user-A (you) decide to create a CALL 100 option for 1 year from now, with strike price of $5. You don't think much about the future of bitcoins. You think they will hold steady at $5.

You buy 100 bitcoins on Mt.Gox and use that to create your option on BitcoinOPX. You then place that option on sale with a price of $100, which you think is a good deal for having your money locked away for 1 year (20% return if you're right).

user-B sees this option, but I'm a big believer in Bitcoin. I think 1 year from now they will be at least $20 each, probably more like $50. That means I would have the right to buy 100 bitcoins at a cost of $500 at Maturity. However, my projection is their true value would be 100 x $20 (or $50) = $2,000 (or $5,000). That's a profit of $1,500 (or $4,500) if I'm right.

At that rate I think paying $100 for the option is a good deal.

When you create the option the bitcoins are placed in escrow with an independent escrow service. This means all options can be settled, if need be, without BitcoinOPX in the picture at all (say if shut down for legal reasons). However, with things running normally, every Friday when options mature BitcoinOPX requests back the required number of bitcoins from BTCrow, and settles all member accounts appropriately.

I hope that makes sense.

Edit: I changed the above wording to a more logical thought pattern for profit from each user's perspective.

This works with a call option but does not work with a put option.

user-A (you) decide to create a PUT 100 option for 1 year from now, with strike price of $5. You don't think much about the value of bitcoins dropping. You think they will hold steady at $5 or maybe rise.

You buy 100 bitcoins on Mt.Gox and use that to create your option on BitcoinOPX. You then place that option on sale with a price of $100, which you think is a good deal for having your money locked away for 1 year (20% return or more if you're right as your collateral bitcoins can also go up in value).

user-B sees this option, but I'm a big believer in Bitcoin crashing. I think 1 year from now they will be no more than $0.004 each, probably more like $0.001 each. That means I would have the right to sell 100 bitcoins at a cost of $500 at Maturity. However, my projection is their true value would be 100 x $0.004 (or $0.001) = $0.40 (or $0.10). That's a profit of $499.60 (or $499.90) if I'm right.

At that rate I think paying $100 for the option is a good deal. But there is a problem the collateral backing up my $499,60 or $499.90 profit is only worth $0.40 or $0.10 as the case me be. Ouch!

Moral: You need to escrow USD and BTC not just BTC.

[BitcoinOPX]

.... How about integrating some kind of calculator,
     or at least displaying an effective base price? For example: If I create an call-10 option @ $4 and then offering
     it for sale at $11.5, then what I'm doing effectively is to sell 10 BTC at a rate of 5.15 -- well, actually I hope
     to do such a deal, and I'll plan it for a future day.

Basically people familiar with trading handle numbers almost intuitively and / or use a calculator frequently. But hey,
why do we have computers today? Why shall I do number crunching in my head or use an external calculator, when
a nifty little javascript could do the calculations for me right in the webpage?

Regarding point #1 you are right. I'll look at expanding the placement of the create option link. On point #2 I agree also. There should be some kind of default calculation done.

Hello,

expanding on that idea: especially, if such an embedded calculator could also include the fees, then this feature would start being helpful beyond just being a convenience. Especially regarding the 10 BTC options, the fee is actually a quite considerable factor.

Another usability related proposal: When I create a buy / sell offer, "confirm" brings me to a page showing all the details, including that fee. Well, if I now decide that my choosen limit wasn't appropriate, factoring in also the fee, then there is no way just to correct my order. All I can do is to "cancel", which discards all the values in the form. This is especially annoying when I entered that order values by clicking on the link "sell to open" after having created a new option. Because then I have to go back to "my account" and click that link again, and then recall the corrected limit price. Of course this isn't a real obstacle, but it isn't a smooth experience either.

-- Ichthyo

Both good points.

[hazek]

I placed an order for a negative quantity at a negative price.

LOL  

Thanks, definitely a bug.

It's also possible to create a single buy to open call10 order where the price exceeds your balance. Is that also a bug?

Also, how can cancel options I created?

[Ichthyo]

You might want to delete the event calendar as it is clutter.

Agreed, the calendar just uses up screen real estate. Any ideas how to use that area more effectively?

One thing which I'd expect to become difficult, when using the site for real: Where are actually offers available?
Let me explain: Basically you offer a maturity date every week. But you intend to cover a huge range into the future. Now, let's assume I'm interested in buying some option "roughly a year into the future". This would force me to flip through several pages of orders, just to find something suitable. :-/  Unless your service catches on exceptionally, I'd expect those orders to be rather sparse and scattered. Or do you intend to engage into market making?

I'm not sure how to do this, but maybe someone has a striking idea: some kind of a scrollable timeline, where we can see the density of options available for sale? Maybe even some indication of the weighted average at a given point in future? At leaast, I think, such a graph would be more helpful than that calendar ;-)

-- Ichthyo

[BitcoinOPX]

what was not entirely clear:

will you yourself be the counterparty in this trade?
or are you also matching buyers+sellers but for options?

Thanks for the question.

Things are not set up for me to be a counterparty, but I could be. The system simply lets anyone create an option then sell it on the open market. Let me walk through an example. You are user-A and I am user-B.

user-A (you) decide to create a CALL 100 option for 1 year from now, with strike price of $5. You don't think much about the future of bitcoins. You think they will hold steady at $5.

You buy 100 bitcoins on Mt.Gox and use that to create your option on BitcoinOPX. You then place that option on sale with a price of $100, which you think is a good deal for having your money locked away for 1 year (20% return if you're right).

user-B sees this option, but I'm a big believer in Bitcoin. I think 1 year from now they will be at least $20 each, probably more like $50. That means I would have the right to buy 100 bitcoins at a cost of $500 at Maturity. However, my projection is their true value would be 100 x $20 (or $50) = $2,000 (or $5,000). That's a profit of $1,500 (or $4,500) if I'm right.

At that rate I think paying $100 for the option is a good deal.

When you create the option the bitcoins are placed in escrow with an independent escrow service. This means all options can be settled, if need be, without BitcoinOPX in the picture at all (say if shut down for legal reasons). However, with things running normally, every Friday when options mature BitcoinOPX requests back the required number of bitcoins from BTCrow, and settles all member accounts appropriately.

I hope that makes sense.

Edit: I changed the above wording to a more logical thought pattern for profit from each user's perspective.

This works with a call option but does not work with a put option.

user-A (you) decide to create a PUT 100 option for 1 year from now, with strike price of $5. You don't think much about the value of bitcoins dropping. You think they will hold steady at $5 or maybe rise.

You buy 100 bitcoins on Mt.Gox and use that to create your option on BitcoinOPX. You then place that option on sale with a price of $100, which you think is a good deal for having your money locked away for 1 year (20% return or more if you're right as your collateral bitcoins can also go up in value).

user-B sees this option, but I'm a big believer in Bitcoin crashing. I think 1 year from now they will be no more than $0.004 each, probably more like $0.001 each. That means I would have the right to sell 100 bitcoins at a cost of $500 at Maturity. However, my projection is their true value would be 100 x $0.004 (or $0.001) = $0.40 (or $0.10). That's a profit of $499.60 (or $499.90) if I'm right.

At that rate I think paying $100 for the option is a good deal. But there is a problem the collateral backing up my $499,60 or $499.90 profit is only worth $0.40 or $0.10 as the case me be. Ouch!

Moral: You need to escrow USD and BTC not just BTC.

Yes, puts are a bit of an issue. As noted on the site our escrow service only accepts bitcoins, likely for legal reasons. We didn't want to not offer puts, so the half-measure of sticking with BTC was taken. The reasoning is only short term puts will trade much (probably discounted), because of the growing risk of default as time lengthens.

If things go well with the site, however, in time there may indeed be USD backing puts as would be proper.

[ArticMine]

Yes but can't you find anyone else to escrow USD? There is no need to use the same escrow service for both USD and BTC.

[BitcoinOPX]

I placed an order for a negative quantity at a negative price.

LOL  

Thanks, definitely a bug.

It's also possible to create a single buy to open call10 order where the price exceeds your balance. Is that also a bug?

Also, how can cancel options I created?

No, the system will accept any order you place. It assumes you know what you're doing and that you will add funds as needed. The order won't execute of course unless you can afford it.

You can't cancel options you've created. It warns of this in bold on the page. This is because the bitcoins used as collateral are sent to an independent escrow service. BitcoinOPX loses control of them.

[hazek]

Ah I missed that but it makes sense. So I get my money back once the option expires, right?

[BitcoinOPX]

Yes but can't you find anyone else to escrow USD? There is no need to use the same escrow service for both USD and BTC.

I suppose that's true... the idea was trying to keep things simple in the minds of users. It would also take finding someone already with a track record of trust and willing to be transparent. But I suppose it's not impossible...

[BitcoinOPX]

Ah I missed that but it makes sense. So I get my money back once the option expires, right?

Yes, you get your bitcoins back if the option is not exercised.

[Ichthyo]

If I create multiple options for the same strike price, all of them get the same "Symbol". Moreover, starting with the second such option, the link sell to open dosn't disapear after being used. Maybe both things are related?

-- Ichthyo

[BitcoinOPX]

If I create multiple options for the same strike price, all of them get the same "Symbol". Moreover, starting with the second such option, the link sell to open dosn't disapear after being used. Maybe both things are related?

-- Ichthyo

Yes, the option symbol describes the maturity, srike price, and type of option. So multiple created contracts can have the same symbol, just as multiple shares of a stock have the same symbol.

You would "sell to open" each of the option contracts you created separately. Theoretically they could be grouped for convenience, and that function may be added. Of course, you could also just adjust the quantity of the sell order you placed for the same symbol.

[dree12]

$5000 is listed after $7500 in the USD strike price list.

Also: "Limit: $inf" when putting an insanely high limit value. Just a display issue, the order seems to be $99999999.99 Limit.

[BitcoinOPX]

$5000 is listed after $7500 in the USD strike price list.

Also: "Limit: $inf" when putting an insanely high limit value. Just a display issue, the order seems to be $99999999.99 Limit.

Got it, thanks!