Bitoption.org -- ESCROWED LIVE Bitcoin Options Trading

[Grant]

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!

I agree with all of the above. But i'd like to add also, instead of/in addition to a trading bot, add some buttons next to the calls and the puts called "Trade", that button would then fill out for me the following: "Call/Put"-field, Expiration date, and Strike price. Then i only need to choose "buy/sell" and the bid/ask. Would make it a lot easier for ppl to place orders, filling out those fields once is ok, but doing it over multiple contracts and with the volatility we have multiple times a day is a real undesirable thing to do.

Another thing of increasing ease of use. Under My Contracts, i'd suggest that we also are allowed to "adjust bid/ask" in addition to canceling them

[bitoption]

These are good thoughts. We could also do a simple 'cancel if under / over' essentially a stop-loss for bids and asks.

[FreeMoney]

These are good thoughts. We could also do a simple 'cancel if under / over' essentially a stop-loss for bids and asks.

That would be great.

A few other things.

I'm tired of logging in every 3 minutes. It won't remember me either. My computer is secure, just give the option to leave me in until I manually log out.

Why does placing a bid take up to 30 seconds to register? That can't be right. I click and I don't even know if it accepted my click or not because the button is flat and I get no message. If it has to be slow for some reason at least give an instant "processing" message.

Why not just give a deposit address and leave it visible? Bitcoin-central and mybitcoin do this and I love it. I hate how MtGox does it. Make a button to get a new one for people who care.

[FreeMoney]

Ah, another thing, it seemed like I couldn't make a bid if my bids totaled more than my balance. This actually hurts liquidity and isn't necessary. I could make a bunch more bids if it just knew to withdraw some bids when I ran out of money.

[bitoption]

So, I understand the bidding with what you don't have argument, but that system can be abused by griefers easily. Nefario recently took GBLSE down over this behavior: offers to sell 9999 shares of a security; unfunded, couldn't actually execute on them, but... bad for market analysis and annoying to people trading.

I took the approach that every bid/ask is a firm offer, and funded. I think we'll stick with that for now.

Re: Bidding; I agree, it takes too long. I'm not sure why; will look into it.

Re: Deposits, since we piggy-back on Gox' system, for now, we have to use it. But I agree it's annoying!

Re: Sessions, that's bugging me too. It should be set to like 4 hours. I updated a configuration item. Sessions should now last a really long time.

[TTBit]

I check your site all the time, great work. Due to the extreme volatility, it is too difficult to leave an order out there, but I caution against offering a service that cancels orders based on mtgox price. Too much risk for bitoption.org.

I'll contribute 1 btc bounty for a very basic functioning bot that you approve. Please include a basic BS model.

I like your API, I place all orders with it using an excel spreadsheet. I don't place orders through the browser.

Suggestion: fees - 0% if you make the market, but 2% if you hit the bid/offer. Give an incentive to market makers and bot writing. The people who wait for a huge move and pick off orders should pay the fee.

best of luck with the site.

[FreeMoney]

So, I understand the bidding with what you don't have argument, but that system can be abused by griefers easily. Nefario recently took GBLSE down over this behavior: offers to sell 9999 shares of a security; unfunded, couldn't actually execute on them, but... bad for market analysis and annoying to people trading.

I took the approach that every bid/ask is a firm offer, and funded. I think we'll stick with that for now.

Re: Bidding; I agree, it takes too long. I'm not sure why; will look into it.

Re: Deposits, since we piggy-back on Gox' system, for now, we have to use it. But I agree it's annoying!

Re: Sessions, that's bugging me too. It should be set to like 4 hours. I updated a configuration item. Sessions should now last a really long time.

Ah, I overlooked that. What about a small multiple (3x?) and don't let the bids in one contract surpass the free cash so traders know they could accept that whole offer?

If it has to stay as is it's not that big of a deal. I don't want to raise cash by selling coins to place offers that will probably not get taken, but I can sell puts eventually.

[FreeMoney]

Suggestion: fees - 0% if you make the market, but 2% if you hit the bid/offer. Give an incentive to market makers and bot writing. The people who wait for a huge move and pick off orders should pay the fee.

best of luck with the site.

I second that. It isn't that you don't deserve fees, it's just that you can get so much more by waiting until you have something good to sell, liquidity.

I gave this same advice to MtGox, seems to have worked 

[bitoption]

So TTbit, how do you suggest we implement the commission-free side of things? I am totally willing to do it. Normally I think of Market makers as getting a cut in exchange for keeping up some minimum volume and spread commitments.

Suggestions?

[Ian Maxwell]

Hey, I'm interested in this---I've bought put options in the past as 'insurance' and I may do so again. Or I may start writing calls as opposed to leaving outrageously high asks on Mt Gox 'just in case'.

This question may have been asked already, but I didn't notice an answer: am I able to resell option contracts? I.e. can I buy a call option at a $1.0 premium and then resell it at a $1.5 premium if the exchange rate goes up, without actually escrowing any of my own bitcoins? If not, consider this a feature request.

[FreeMoney]

So TTbit, how do you suggest we implement the commission-free side of things? I am totally willing to do it. Normally I think of Market makers as getting a cut in exchange for keeping up some minimum volume and spread commitments.

Suggestions?

I'm not sure what TT meant, but I was suggesting turning fees off until there is actually a market for you to pull fees off of. Later you can give a cut to keep market makers from going elsewhere or whatever.

[FreeMoney]

I'm still getting logged out, has it not taken effect yet?

[bitoption]

sounds like a session bug.

I've got it on the list, will keep you posted.

[bitoption]

I think TTBit was suggesting that adding liquidity, e.g. making a new offer, perhaps making the best current offer (bid/ask) is rewarded with a 0 commission status. Buying such an offer is charged commission, but I'd like to make sure I understood how he thinks of it.

[dacoinminster]

Looks like there were some insane price swings over the last few days. Did anybody make a killing trading options during that time?

[demonofelru]

Any ETA on getting USD out? Right now writing calls is extremely stupid IMO until this is implemented.  example the current price is $10 per BTC I write a call with a strike price of $15 and expiration 1 month in the future premium is $1.  30 days later the price is $32 it gets executed I get $15 + my premium was $1 giving me $16.  Although I technically made a 60% profit in a month's time which is great I am forced to exchange from BTC which would make it .5 BTC which is a 50% loss.

[bitoption]

Hey Demonofelru,

You can send us USD through Mt. Gox' send USD, and we will (manually) send you out USD using the Mt. Gox send cash-to-an-email functionality. Just email me at admin@bitoption.com.

[bitoption]

I _THINK_ the session bug is fixed now.

[FreeMoney]

I think TTBit was suggesting that adding liquidity, e.g. making a new offer, perhaps making the best current offer (bid/ask) is rewarded with a 0 commission status. Buying such an offer is charged commission, but I'd like to make sure I understood how he thinks of it.

That makes sense for driving surface spreads together, but every offer adds depth.

[bitoption]

OK, so we could just take commission on any offer that picks up other offers. Unfilled offers get no commission. I'll have to see what that would take on the backend. My gut is that it won't be too difficult.

I no longer believe the session bug is fixed.