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Author Topic: Bitoption.org -- ESCROWED LIVE Bitcoin Options Trading  (Read 35026 times)
Ukigo
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June 10, 2011, 06:06:45 PM
 #121

 Please post example trade with call just like put
 example above ? I appreciate your help )

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monte
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June 10, 2011, 06:28:31 PM
 #122

So let me see if I understand this correctly.

I have 1 BTC and I write a Call for it with an Ask of 7.10 and a strike of 50 for 7/28/2011.
This means that:

-My 1 BTC will be in escrow until 7/28/2011.
-To buy this Call someone will have to pay me $7.10.
-If on 7/28/2011 the price of BTC is over $57.10 they will exercise the option and buy it at $50.00.  They will save the difference between $57.10 and the current price and I will make the difference between what I bought the BTC at and $57.10.
-If not then I get to keep the $7.10 and the 1BTC.

Is this correct?

(I don't know if these prices are realistic just put some numbers out there, so forgive me if they are ridiculous.)
bitoption
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June 10, 2011, 06:47:48 PM
 #123

Monte, essentially correct.

I'll re-state for clarity and correctness, though.

-My 1 BTC will be in escrow until 7/28/2011.
-To buy this Call someone will have to pay me $7.10.
-If on 7/28/2011 the price of BTC is over $50.00 <<--
  and they are economically rational <<--
  they will exercise the option and buy it at $50.00. 

They will make the difference between $57.10 and the current price and I will make the difference between what I bought the BTC at and $57.10.
-If not then I get to keep the $7.10 and the 1BTC.


----** In Beta: The First Bitcoin Options Market ----**

Explanation and discussion: http://forum.bitcoin.org/index.php?topic=9611.0

API Developer Thread:
http://forum.bitcoin.org/index.php?topic=14194.0

-----------------------------------------------------------
bitoption
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June 10, 2011, 06:49:32 PM
 #124

I posted this image in another thread to help people understand how to post this trade, by the way: writing a covered call; this is a bet that BTC will still be somewhat valuable, just not $50 valuable in the next two months.


----** In Beta: The First Bitcoin Options Market ----**

Explanation and discussion: http://forum.bitcoin.org/index.php?topic=9611.0

API Developer Thread:
http://forum.bitcoin.org/index.php?topic=14194.0

-----------------------------------------------------------
monte
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June 10, 2011, 09:57:09 PM
 #125

Thanks for the help.

Oh by the way guess who was number 100 on the site! Cool
bitoption
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June 11, 2011, 12:29:12 AM
 #126

Yep, congrats. We passed one hundred registered logins today.


As a side note, I'm seeing some asks in the $50 US range. This doesn't make sense; one contract = 1 BTC. You might as well just buy the BTC if the ask is over market.

----** In Beta: The First Bitcoin Options Market ----**

Explanation and discussion: http://forum.bitcoin.org/index.php?topic=9611.0

API Developer Thread:
http://forum.bitcoin.org/index.php?topic=14194.0

-----------------------------------------------------------
random_cat
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June 11, 2011, 02:29:58 AM
 #127

It appears that in the web UI now the ';my contracts' is hooked to list unfilled contracts but I don't see the a place to display filled contracts.  Probably want that.
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June 11, 2011, 02:55:33 AM
 #128

Yep, congrats. We passed one hundred registered logins today.


As a side note, I'm seeing some asks in the $50 US range. This doesn't make sense; one contract = 1 BTC. You might as well just buy the BTC if the ask is over market.

Bitcoin has high carrying costs, didn't you know?

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bitoption
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June 11, 2011, 04:35:24 AM
 #129

Random, yep, that's right.

FreeMoney -- yep, you need an SSD, a backup SSD, an online backup for your wallet. It adds up!!

----** In Beta: The First Bitcoin Options Market ----**

Explanation and discussion: http://forum.bitcoin.org/index.php?topic=9611.0

API Developer Thread:
http://forum.bitcoin.org/index.php?topic=14194.0

-----------------------------------------------------------
bitoption
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June 11, 2011, 06:46:33 PM
 #130

Good suggestion. I'm currently working on the list of open and active options page, and will be using some logic like this to help people understand what they've got.

As a side note, there's a cheap put in at 6-16 right now; $5 ask, $10 strike. That's $2! Smiley Only one, sadly, but someone should probably pick it up.

----** In Beta: The First Bitcoin Options Market ----**

Explanation and discussion: http://forum.bitcoin.org/index.php?topic=9611.0

API Developer Thread:
http://forum.bitcoin.org/index.php?topic=14194.0

-----------------------------------------------------------
Sukrim
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June 11, 2011, 08:38:29 PM
 #131

How high should ask prices typically be? I mean, as far as I get it, they are a small "bonus" for me for keeping these BTC safe over that time frame and/or cover for a few fees (like mtgox conversion) but all I have to do is anyways just post it on the site and I have 0 costs any more.

I'm all for having a few more descriptive charts (or a more descriptive output for beginners) since I see options as a VERY good thing for miners who want to expand their rigs for example and want to make sure at least x% of it can be paid off. On the other hand of course it limits the potential gains of such rallies as until yesterday, but that's a risk some people might like to take still.

It would also be great to see a few more examples as monte posted them and have maybe a few opinions on pricing (is 7 USD as ask price much or not? Would you buy into such a deal?).

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bitoption
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June 11, 2011, 08:57:59 PM
 #132

most options traders use something called Black-Scholes as a baseline for pricing.

I won't comment on how appropriate Black-Scholes is in this case, but I would be surprised if you didn't see some broader orders going in that use this pricing as a metric.

That said, options pricing is tough, in fact Scholes (and one of his buddies, I believe) won the Nobel prize for economics coming up with his options-pricing framework.

I'm still working on making the market work better (just in: check out the new /contracts page, if you're logged in), so I can't say a lot more about pricing right now.

----** In Beta: The First Bitcoin Options Market ----**

Explanation and discussion: http://forum.bitcoin.org/index.php?topic=9611.0

API Developer Thread:
http://forum.bitcoin.org/index.php?topic=14194.0

-----------------------------------------------------------
JCD3nton
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June 11, 2011, 09:18:37 PM
 #133

I'm totally confused about how to buy an already existing contract.

Do I just place an order that matches the existing contract I want and the system will match them together?

Or is there a way to select the specific contract from the list pf bids/asks and buy it?
Febuz
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June 11, 2011, 11:23:30 PM
 #134

Hello Bitoption,

Great to have an options site and i'm sure you will earn money.
Four remarks/bugs? and two questions

Remarks
- If I buy an option by covering the ask with my bid price, it buy + the order keeps on buying (bug?)
- If I have a contract I'm not able to sell it by putting an ask price for this contract (bug?)
- My contracts shows my orders, not my contracts (bug?)
- I see no margin requirement/ free cash balance + obligations is wrongly stated (should be only for written options, includes all???)

Quesions
- How can I execute my put option if the BTC price reaches a point belof the strike?
(since in the FAQ you state that they are American and how do you handle expiration)
- How can I manage/ see my contracts (besides history)?

Kind Regards,
Febuz
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June 12, 2011, 12:00:45 AM
 #135

Hello bitoption,

I was thinking, if someone buys that 5$ 10$strike put
And sells one to someone else for 6$
did he
- incurr the 5$ cost + 0.05$(1%) commission?
- and he has 10$ margin requirement?

So his free cash will be balance - (15.05$ instead of correct +0.95$)
This is still a mistake in bitoptoin.org
Or I must be thinking wrong, please let me know

Besides up till the moment of exercise
This market is illiquid since I can still not sell or exercise a contract.


Kind Regards,
Edwin
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June 12, 2011, 01:52:22 AM
 #136

I want to short bitcoins and I'm currently waiting on getting my money into MtGox.

I'm worried that I have to convert my US dollars into BTC as I'm a hardcore bear and think it could drop a lot (and the past several days are either a correction or the sign of a long-run bear market).  How long would my money have to be in BTC?

Unfortunately there isn't the volume of options that I'd like and this increases the length of time my money would be in BTC.

I guess I missed out on the ideal shorting situation which was when the price was rising (and the short contracts would have been cheap).

Side Note: I can EDIT my posts. But I cannot make new ones!  The "REPLY" link is gone.  The "NEW Post" link is gone.  Very very weird!


Don't day trade.
bitoption
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June 12, 2011, 03:57:40 AM
 #137

Hi all,

I'm working furiously on the following things:

1) Listing Active Contracts
2) Hooking up exercising to the web interface
3) re-listing your options for sale

@nrd52, I think what you should do is bid on cheap puts. You can send me USD via mt. gox' send USD interface (to admin@bitoption.com) and you'll never have to touch BTC until you decide you want to exercise your puts.

If you bid on puts, we'll just take your cash and transfer, no escrow on your side, no BTC necessary.

As far as the market being thin, it's less thin than yesterday! I'm sure a large volume of bids will help. Smiley Gotta start somewhere. You could also advertise your puts; I think that the escrowing means people are more likely to do such a deal than just on rep in the forums. Hope this helps.

I have to hold other mechanics-type conversations for a bit so that I can get things sorted out on the site, sorry!

----** In Beta: The First Bitcoin Options Market ----**

Explanation and discussion: http://forum.bitcoin.org/index.php?topic=9611.0

API Developer Thread:
http://forum.bitcoin.org/index.php?topic=14194.0

-----------------------------------------------------------
bitoption
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June 12, 2011, 05:42:14 AM
 #138

OK,

If you login and click "Contracts" You should see a list of all active contracts and open contracts, you can exercise / cancel them, (depending on if they're active or open).

I have slightly better error warnings put in in a few places.

Re-listing options will happen soon, through the /contracts page, you'll be able to 'sell' an obligation.

----** In Beta: The First Bitcoin Options Market ----**

Explanation and discussion: http://forum.bitcoin.org/index.php?topic=9611.0

API Developer Thread:
http://forum.bitcoin.org/index.php?topic=14194.0

-----------------------------------------------------------
bitoption
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June 13, 2011, 03:53:20 AM
 #139

Fellow Option traders, I've been watching the market for a bit now, and have come to some conclusions:

1) I'm having a lot of fun! I hope you are as well. I have written and purchased some nice options, and enjoyed it immensely.

2) Liquidity, it's a problem. We're still early days, but I am thinking hard about this, and have some thoughts and questions below.


So, liquidity. There are three ways that I can think of to increase liquidity:

A) Increase number of trading partners
B) Increase desirability of underlying
C) Limit number of ways to buy underlying

I'd like some feedback as to which of these I should approach next: I have a proposal for each.

A) As far as increasing number of trading partners, the best thing I think I could do would be to open source a market-making bot; it would use some very basic math to place trades. Everyone would be welcome to download and use. Because the BTC is SO volatile, it's really hard to post orders and leave them out there. The 24/7 market thing makes it worse, too; it could be midnight GMT when the bad shit goes down. No fun. This means that if you want to buy / sell a few options, you're essentially going to be fill-or-kill on them; you shouldn't let them float out there for long without a computer to mind them for you. So, this would enable you all to be that market-making sort.


B) With this sort of volatility, I hate to say it, but American options stink. European would probably let everyone sleep a lot better, as far as I can tell, and be a lot easier to value. I think this would increase everyone's interest in having them, (and of course, you could still daytrade them if you wanted!)

Secondary thought here - the market still needs to allow you to resell your contracts, this would help as well, but doesn't address the big picture.


C) We can get more depth by shrinking the number of possible lines that can be traded. I am considering $5 increments and monthly right now.

I have also been working on an hourly /daily binary market, so that could help people make short-term swing bets if they liked, while keeping the (hopefully) more useful larger market for what it's intended: hedging risk and wild speculation.

Please give feedback here!

Thanks!

----** In Beta: The First Bitcoin Options Market ----**

Explanation and discussion: http://forum.bitcoin.org/index.php?topic=9611.0

API Developer Thread:
http://forum.bitcoin.org/index.php?topic=14194.0

-----------------------------------------------------------
FreeMoney
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June 13, 2011, 05:11:47 AM
 #140

A) Excellent. I just can't make my best offers because I want them to float with the price. I'm only putting in offers I won't mid getting executed at a much different bitcoin price because I can't monitor it constantly. I would love a simple bot that let me put in a price based on a few relevant variables.


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