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Author Topic: Introducing Hourly Bitcoin Options - [Updated: Now exercise options anytime!]  (Read 1805 times)
BitcoinOPX
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August 03, 2012, 09:59:09 PM
 #1

Hey everyone,

I'm happy to announce our exciting new change: hourly options

https://bitcoinopx.com

We've had lots of interest since launching in June, but little volume. This is probably due to our options schedule not fitting in well with the needs of the Bitcoin community. Hopefully that's now changed. People deposit, withdraw, and trade bitcoins on exchanges 24/7, so it makes sense hourly scheduled options might be a better fit Smiley

This can also provide leverage as we have option sizes of 1, 10, 100, or 1,000 bitcoins. Mt.Gox currently shows a swing of over $1 in the last 24 hours. Multiplying that by one of the option sizes results in good leverage opportunity. Create options from 1 to 24 hours away!

Details are on our updated How it Works page.

We hope you'll try out our new set up, and let us know what you think.

Happy trading! Smiley
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Stephen Gornick
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August 04, 2012, 12:09:15 AM
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https://bitcoinopx.com

We've had lots of interest since launching in June, but little volume.

There's a usability problem, I think.   

I can't visualize the order book.  If there has ever been an offer from a CALL writers or buyer shown, I've never seen one in the half dozen times I've looked.  Is it that there are none, so nobody wants to go first perhaps?   Or is it a UI problem where any open orders available for trade just aren't easily seen?
BitcoinOPX
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August 04, 2012, 12:24:03 AM
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https://bitcoinopx.com

We've had lots of interest since launching in June, but little volume.

There's a usability problem, I think.    

I can't visualize the order book.  If there has ever been an offer from a CALL writers or buyer shown, I've never seen one in the half dozen times I've looked.  Is it that there are none, so nobody wants to go first perhaps?   Or is it a UI problem where any open orders available for trade just aren't easily seen?

You could be right, but I think the larger problem was not fitting community needs.

Previously, options matured weekly, every Friday at 6PM. If I gave you $50 and asked you to set up a trade for me to profit on that model, a Bitcoin option expiring Friday, August 10th, what would you do?

I think you would say it's very hard to imagine what the bitcoin price will be next Friday.

However, if I gave you the $50 and asked you to set up a trade for an option expiring 6 or 8 hours from now would you feel a little more confident? I would think so. Based on the current price you can imagine that it may go up or down, and have reasons why, but it's harder to do that with bitcoins for longer time frames.

People have very real need to move their money around with bitcoins/USD etc. 24/7 via exchanges. Deposit and withdrawal delays, fees, etc. become an issue and services like FastCash4Bitcoins.com do well just focusing on helping one aspect (cash outs). FastCash4Bitcoins provides a real-time exchange rate for how much they will pay at any given time to cash out your bitcoins.

With our new hourly setup FastCash4Bitcoins.com could hedge their BTC holdings if they wanted to, for example. It should be useful to many people this way, which of course would result in volume.
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August 04, 2012, 01:37:09 AM
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We've had lots of interest since launching in June, but little volume.
frankly, did you have any volume at all? I looked frequently and never saw any offer

There's a usability problem, I think.   

I can't visualize the order book.  If there has ever been an offer from a CALL writers or buyer shown, I've never seen one in the half dozen times I've looked.

I want to second what Stephen Gornick pointed out. This usability problem IMHO is what prevents anyone to try out your service.
By introducing hourly options, you've turned matters from bad to worse. How many pages do you assume any user is willing to flip, in order to find a single offer which might be appealing? Let alone the fact that it would be near impossible to compare and judge offers which are hidden and scattered over dozens of table pages.


Regarding the difficulty to predict a bitcoin rate way ahead into the future you might have a point.
But, instead of increasing the complexity for the user by providing a plethora of maturity dates, why not going into the other direction?

Why don't you offer american style options, which can be exercised any time when applicable?
Going this route would even allow to have fewer maturity dates. Once any month would be sufficient. It is way more tangible to judge if some price level will be hit any time during the next month, then to set up a bet that some price level will be hit at a single probe point somewhere in the future.


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August 04, 2012, 02:07:28 AM
 #5

bitoptions.org offered american-style options for several months.  They never gained much favor, but were the only game in town before bitcoinica.

The bitcoinica model was wildly more popular, possibly because it is so easy to understand.

Personally I'm interested in long-range options - like several months. Though after all this hacking, I'm thinking a manual-escrow system might be safer. It is easier to find a single person who you can trust, than finding a group of people that you can trust not to steal the money AND that you can trust to write secure code.

Don't day trade.
Vitalik Buterin
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August 05, 2012, 02:44:31 PM
 #6

One question - let's say that I accept a call for 10 BTC at $10.50 with an expiration time of one day. Two hours later, the price goes up to $11, and I want to cash out. How do I do that? Is my only choice to accept a 10 BTC put option as well so that the two cancel each other out? Can I sell my option for a price? If so, if the price drops to $9.90 instead, and I want to cash out because I'm scared that it will go down further, can I cut my losses by selling it for a negative price?

Argumentum ad lunam: the fallacy that because Bitcoin's price is rising really fast the currency must be a speculative bubble and/or Ponzi scheme.
BitcoinOPX
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August 07, 2012, 12:14:05 AM
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frankly, did you have any volume at all? I looked frequently and never saw any offer

We had a little activity, but mostly small testing type stuff.

There's a usability problem, I think.    

I can't visualize the order book.  If there has ever been an offer from a CALL writers or buyer shown, I've never seen one in the half dozen times I've looked.

I want to second what Stephen Gornick pointed out. This usability problem IMHO is what prevents anyone to try out your service.
By introducing hourly options, you've turned matters from bad to worse. How many pages do you assume any user is willing to flip, in order to find a single offer which might be appealing? Let alone the fact that it would be near impossible to compare and judge offers which are hidden and scattered over dozens of table pages.

You both are right about usability! So we've added a Trade page link to view ALL active options on one page.

Regarding the difficulty to predict a bitcoin rate way ahead into the future you might have a point.
But, instead of increasing the complexity for the user by providing a plethora of maturity dates, why not going into the other direction?

Why don't you offer american style options, which can be exercised any time when applicable?
Going this route would even allow to have fewer maturity dates. Once any month would be sufficient. It is way more tangible to judge if some price level will be hit any time during the next month, then to set up a bet that some price level will be hit at a single probe point somewhere in the future.

You have a GREAT point about American style options. Smiley

We've added it! Now you can exercise an option anytime there is a payment due before maturity. Options are exercised automatically at maturity when applicable as well.
______________

bitoptions.org offered american-style options for several months.  They never gained much favor, but were the only game in town before bitcoinica.

The bitcoinica model was wildly more popular, possibly because it is so easy to understand.

Personally I'm interested in long-range options - like several months. Though after all this hacking, I'm thinking a manual-escrow system might be safer. It is easier to find a single person who you can trust, than finding a group of people that you can trust not to steal the money AND that you can trust to write secure code.

I agree about Bitcoinica being more straightforward for usability: If you think the price is going up you buy, otherwise you sell, and there is leverage to magnify your bet... simple! However, options are a popular instrument in the real world because they offer so many strategies and opportunities. Hopefully, adding American style ability to exercise options anytime should help with simplicity. If you think the price is going above (or below for puts) the strike price at anytime before you can anticipate payment due.

We may add longer range options, but these short term ones might jumpstart volume being useful for community needs.

I agree security/trust is a Bitcoin concern. Regarding security we use the view nothing is 100% hackproof. Therefore we don't store any funds on the site at all. Even if our site is completely compromised no funds can be moved. Further, we process withdrawals manually, and require email confirmation. Additionally, we salt and hash passwords using bcrypt.  

For the trust factor I advise keeping as low an amount of funds on any site as possible. There is no reason to keep them parked. I say put in what you need to conduct transactions, and when that's done withdraw it. If this technique had been used with Bitcoinica I think losses would have been greatly reduced. It also would have reduced/eliminated their ability to be a bucket shop, if that's what they were as has been alleged.
____________

One question - let's say that I accept a call for 10 BTC at $10.50 with an expiration time of one day. Two hours later, the price goes up to $11, and I want to cash out. How do I do that?

Thanks to feedback from @Ichthyo we've added the American style ability to exercise options anytime before maturity. So in that situation you would click Transactions then the 'Exercise' link and proceed to exercise the option for an immediate payment of $5.00 (10 bitcoins multiplied by $0.50). You could then withdraw the funds.

Is my only choice to accept a 10 BTC put option as well so that the two cancel each other out?

If the price was moving higher as described you probably wouldn't want to buy a put, but it's your choice of course. The system doesn't cancel opposing positions automatically; they will execute independently, although mathematically the result is the same.


Can I sell my option for a price?

Yes!

And that's part of the unique opportunity options provide not possible with forex-style margin trading, for example. With option instruments you can also sell the instrument for a profit. This means you can profit on what people think about price direction not just the actual market price.

If so, if the price drops to $9.90 instead, and I want to cash out because I'm scared that it will go down further, can I cut my losses by selling it for a negative price?

If the market price has dropped below the strike price you can of course try to sell your option, and put it on sale of any amount you chose (minimum $.30 to cover trade fee). However, it's not likely anyone would buy your option if they thought the price would continue falling. A way to entice buyers in that case might be to use a really low price, and hope potential buyers feel there is still sufficient time for the price to rise again.
Stephen Gornick
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August 08, 2012, 04:00:29 AM
 #8

Details are on our updated How it Works page.

Regarding the fee:


Quote
Fees
The fee is $0.25 per contract on trades.

Do I pay the fee regardless of whether anyone accepts my offer?

Say I want to offer a Buy to Open CALL:

  Aug-08 16:00 $10.50 CALL 10 (BTC)  and I give it a limit of $0.3. 
Plus the fee, that order will cost me $0.55.

And, since that is a horrible offer nobody takes it before the expiry date.  When that happens, do I get the $0.55 back or just the $0.30?
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