Bitoption.org -- ESCROWED LIVE Bitcoin Options Trading

[bitoption]

Second update, we got DDOS'ed today, but seem to have weathered it ok. Services are at normal.

Exercising puts is verified working.

Thanks for bearing with us!!

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[1714474009]

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[Stephen Gornick]

How does this impact BitOption?

A person [which includes companies] shall not offer to, or enter into with, a person that is not an eligible contract participant, any agreement, contract, or transaction in foreign currency except pursuant to a rule or regulation of a Federal regulatory agency allowing the agreement, contract, or transaction under such terms and conditions as the Federal regulatory agency shall prescribe…

   Section 742(c) of the Dodd-Frank Act
  http://www.opencongress.org/bill/111-h4173/text?version=enr&nid=t0:enr:6175


 - http://www.zerohedge.com/article/trading-over-counter-gold-and-silver-be-illegal-beginning-july-15

[FreeMoney]

I seem to have plenty of USD available, but I'm being told I don't have enough to place bids. Am I misreading or is there a bug?

[Stephen Gornick]

I get the following error when attempting to register:
 

There was some sort of problem. Try again.

[bitoption]

I'm on a boat with limited internet right now, trying to get these assessed. Likely it's fallout from our new session system, installed under urgent time pressure. Sorry!

[bitoption]

Stephen, we had two places that the register form might call the backend; in one of them, we weren't using the new anti-CSRF system. It's fixed now, sorry!

FreeMoney, I just tried posting bids on puts and calls, it works for me. Did you double check that subtracted your obligations from your total USD? I will put in a better reporting interface shortly.

[DamienBlack]

Any chance we can get a rollback too? I made some stupid decisions to try and get some cash in order to buy low during the hackcrash.

Its ok I guess, it wasn't that bad. That's what I get for being reactionary.

[bitoption]

Damien,

As far as available BTC/USD, we will roll back in accordance with Gox, as we use their history. This is likely to be a big mess. I'm going to turn off Mt. Gox facilities on bitoption until things settle down; you will still be able to trade, but you won't be able to send / withdraw until I'm sure we're settled properly.

Personally I had a bunch of buys down at $7 or $8 on Gox; looks like I wasn't aggressive enough!

[optionstalker]

I've been following this thread for a while. Nice work @bitoption on launching a functional options trading site! Question: why not accept DWOLLA for USD transfers instead of the MtGox->USD send process? Cheers.

[FreeMoney]

I think I have phantom obligations. Right now I have no outstanding bids or asks on anything and only own some call options. I should be able to use all of my balance to place bids, right? Will my account name help?

[DamienBlack]

I think I have phantom obligations. Right now I have no outstanding bids or asks on anything and only own some call options. I should be able to use all of my balance to place bids, right? Will my account name help?

Your bids count as obligations, at the bid amount. And any ask puts either a bitcion (call) or some USD (put) into escrow. By your description, you should have no obligations.

[bitoption]

FreeMoney, email me at admin@bitoption.com, and I'll make sure we're properly sorted on your account. You shouldn't be seeing this behavior. Like always, I'll post any updates and resolution here. I'm all about transparency!

Inre: Frank Dodd, we're not domiciled in the USA, but see below.

Inre: Dwolla -- The answer is that I'm still figuring out the entire business plan. Doing this business fully registered almost anywhere in the world means you need to comply with US regs when you're dealing with US citizens on US soil. It was easy to piggy back onto Mt. Gox, and I knew generally that we'd be covered by their setup, so I did it. Right now, I regret that!

My hypothesis is that there is going to be strong demand for a fully registered, functioning exchange which can work in and outside the US in high dollar volumes. Bitoption is my first foray in that direction; there are whole bunch of moving pieces there, though, including US regulatory regime.

[bitoption]

Damien,

In answer to your question about writing the 6th call; we would allow you to do that; you'd then have: 0 BTC and $115. The question is then "what next?" What I'm proposing is that any action that would take you negative would force the suggested flowchart to execute.

So, In our case, you want to go buy a $20 Put.

Now you have -1 BTC, since you don't have the money to pay for that call. At that point, we walk through the process.  In the situation I'm describing, you could get out of for less than $100 by just buying 1 BTC, and the flowchart would get there first automatically since you don't own any in the money calls (presumably).

Then you'd have (if BTC were at $10), 0 BTC net, $85 cash and some puts and calls.

It is head-spinning on the numbers. I agree a flow chart would make a lot of sense. We have a sort of state machine going here in describing it.

I think I want to build up from the bottom; the first thing that needs to be done is an auto-exercise, then a 'multi-stage' execute, that is, execute, exchange, execute again.

Then I can add closing out positions and the 'net requirements' calculation.

Once those are done, we can open the leverage up a little, say to asks on a certain strike/date.

We have a little time since Gox is down, but I'm eager to get the next level going for you guys.

[billyjoeallen]

So I logged on several times and I can't access my balance, coins or my contracts. I get an "internal server error" or a blank pop-up box.  Sent PM twice to bitoption with no response.

[FreeMoney]

Email sent.

[bitoption]

Billy Joe is settled; just had to logout and back in.

FreeMoney seems to be settled from my side; just waiting to hear back from him/her.

[bitoption]

I wanted to make a few notes / updates here for people as it's been a bit of an unsettling week.

We filed the exchange's Mt. Gox claim today; we should have no problem getting our account reopened; the password was plenty secure, and the account was used frequently and created after the salted passwords were added.

I would like to make something clear; as of right now, I have enough BTC (stored outside of Mt. Gox) to cover all losses the exchange would incur if Mt. Gox died and delivered 0 to everyone. It would take me pretty close to zero, but I could do it.

It's my hope that I won't have to do that, but I appreciate the trust you all have put in me and the exchange, and I definitely sleep well at night knowing that we can cover our obligations.

Long term, I am considering how to best store the BTC and USD for the exchange. As it is, I had considered it a safer and more secure solution to use Mt. Gox directly than to deal with Dwolla, wallet backups and etc. This might have been a bad decision, or it might be that Gox is still better placed to deal with this right now, while I work on features. I think we'll know more in the next week or so.

As might be expected, trading has slowed on bitoption this week; it's been helpful for me as we were moving at a breakneck pace for a bit there.

Upcoming Changes
I am 90% settled (meaning: advocate hard, now, if you disagree) on the following structural changes to the market:

As of June 30 or so, all new options written will be European style. We will keep the weekly options close dates. European and American style options will coexist in the system out through roughly Dec-30, as some have been written / bought out in that timeframe; you'll just see the 'exercise' link next to the ones you can exercise.

We will halt trading 24 hours before a period close, and allow exercising of options during that 24 hour period UNTIL we implement auto-exercise, at which point we will probably turn off exercising altogether.

We will soon allow a very specific netting: bought and sold contracts of the same type and positive strike delta for the same date. This is easy to implement and low risk to the exchange, plus it will free up some funds for you all.

This netting system means you'll be able to buy and sell contracts along the way, creating the sort of value that most option traders are looking for. It also means you can dig out your Black-Scholes calculators, something I think will be a big help for proper pricing.

It is my goal to also implement a more effective margin system, along the lines Damien and I have been discussing. When it rolls out, we will likely first lock any account that goes 'negative' based on some risk scoring, and it will need to be manually reinstated; this will give us the ability to make sure we're getting things right, something everybody wants, no doubt.

Because of this locking, I will probably make margining 'opt-in' meaning you can trade on hard assets only, and avoid the heuristic locking.

Finally, I built the system to be pretty careful about money (for instance, the first thing I wrote was the exchange's balance sheet functionality), but I am convinced that a full, replayable log is the right thing to have given what happened with Mt. Gox. I'm still getting my head around the right way to do this; suggestions are welcome. My current plan would be to dump out a log of each request to something like a co-located MongoDB box. This of course has its security implications, and I'm happy to have more eyes on this than less.

[FreeMoney]

Yes, my issue is fixed. I managed to break something by leaving bids out past expiry.

[koin]

i'm missing the meaning of the price column.  i see that the change column refers to the change over the last two trades, so does that mean price is the last price the option was traded at?

[brendio]

Yeah, price is the last premium amount the option traded at.

What's the time scale on the change column? Is it in the last day (which time zone is your cut-off)? Since the previous trade?

It would be good to see a history of trades to get an idea of where the market is at.