Topic: Everything you wanted to know about BTC futures but were afraid to ask! - page 8. (Read 4054 times)

Sounds to me that you are looking to lose money, get scammed or to gamble for the mere sake of it.

When members are repeatedly suggesting that you do some research, they are trying to be nice to you, which really means that you need to look around more and maybe even practice more, which also might mean to look more closely at yourself too, including how you are playing your own finances as well as how much of yourself you are planning to invest into something that you admittedly do not know but seemed rush to learn the nuts and bolts.

Many times when guys (and perhaps a gal or two) are able to make decent money in trading BTC (and the use of other financial instruments), they might suggest to you that it is easy, but the good ones will have spent a considerable amount of time practicing such trade (hopefully with low amounts) and building their own expertise, which would then involve adding more sophisticated and complicated financial instruments after having had really gotten used to the more simple instruments.

You usually will not make more money by merely employing more complicated trading instruments, unless you already know the simple instruments well and really study and practice on a personal level with those more complicated instruments (and you likely do not need to be an expert when you start because you can learn as you go, with small amounts), because the more complicated the instrument are designed to be in favor of the house, and you have to know the instrument so well that you can overcome the ways that the instruments are designed to be in favor of the house in order to be able to make money or to make a killing from such instrument(s).

By the way, I am continuously surprised regarding how many folks (members) that I run into in this space who seem to be so unsatisfied with the simple investing methods with BTC that is likely going to make a lot of people a lot of money, just as it has in the past, but there are so many people who want to accelerate such money making process by 10x or more and therefore end up missing up on the considerable great opportunities that are available with relatively straight forward BTC investing strategies involving, buying, accumulating and holding.... and if you get the BTC part down (without getting sucked into get rich quick schemes), then maybe you can take 10% of that value and start to play with other more complicated financial instruments that involve hedges: such as leverage, margins, options and/or futures.. which also can sound like investing in an alt when BTC is risky enough and already with a lot of upside potential.

Yes I want to DYOR but could you give me some links for that?
Which platform do you recommend? On which platform are you trading? Do you know some platforms where I can apply this strategy?
Is there a way to apply the strategy on bitmex futures?
Thank you

This is not MY strategy. This strategy has been used since future has been traded on the markets.
DYOR before using real money on this if you are not sure on how these instruments work.

Hello thank you for your reply but I don't want to just trade futures, I already Mex. I want to apply his strategy, he says we can profit from the situation, but I would know how to do it while I can't trade on Bakkt and nobody here. So I was asking him where I can apply his strategy. Thank you.

You absolutely must do your own research if you're going to trade futures. Bitfinex, Bitmex, Deribit and Bybit are popular right now. Okcoin and Bitflyer for price signals, you'd have trouble signing up. But they are all crooks essentially. Also, use a vpn.

You're using which platform to trade futures please? Which platforms do you recommend?
I can't use Bakkt, and I think most of people can't here, so we can't apply your strategy if you don't give us a platform available to us.

I don’t know the term structure on Bitmex, but the strategy is viable when there is a contango in future prices (the other way round when there is a backwardstion).
So, yes, as long as your cost of carry doesn’t erase the positive price differential, yes you can trade that.

Why are the prices so steep?
I still have no clue. Investigating this.

Hello
How can we apply your strategy to futures on Bitmex? Because I can't trade on Bakkt.
Why futures of March are above spot price and other futures?

A few days ago PlanB made the following statement.
https://twitter.com/100trillionUSD/status/1191293123298832386?s=20


What does it means?
Is it really possible to profit from this situation?

Let's proceed in order and see what the facts are, concentrating only on BAkkt, for the sake of simplicity and because more similar to thread analysiss, but the reasoning is the same for every other future  

From the Bakkt website we gather the information on the prices of the futures currently traded.



I carefully selected a time where the last contract, the less liquid has the same timestamp of the first, so we have some reliable quotation for the examples. Others contract have a slightly different timestamps, so the calculation won't be actually very reliable, but it is something we must cope with until liquidity is good on all the instruments.

At the time of trading the Spot price, (I used the CME Real Time Index, it's the bitcoin priced used by CME futures) was trading at $ 9,310.

So the situation was the following one:

               

or graphically:



We can see the future term structure exhibit a nice upward slowing curve: that is a contango: as explained in the op that is the situation when future price are above the forward price.

So the idea is to profit from this situation selling a future, while at the same time buying a bitcoin on the spot market, to be held it until future expiry.
In this way at the expiry you will have a bitcoin to be sold to your conterpart. Having bought the bitcoin at a lower price, you are actualy locking in the price difference you executed your trades.

Let's see in the details

Buy 1 BTC SPOT@9,310 USD
Sell 1 BTC MAR20 Future @9,610 USD

On 20 March 20 you will have to sell your Bitcoin to you counterpart at 9,610 USD. Having bought that bitcoin at 9,310 USD, wou are actually cashing in 300 USD as a pofit.
300 USD profit on a 9,610 investment, is 2,70% return. a 2,70% return over 135 days is roughly 8,70 on a yearly basis.

This is pretty consistent with PlanB numbers.

Please note that:

• This is a market neutral strategy: you are not exposed to market risks, bitcoin can go up to 30,000 USD or crash to 1,000 SUD and your profit will stay the same, as you are buying and selling a bitcoin at the same time.
• We are neglecting the cost of carry: or the cost of holding a bitcoin untily trade expiry. I think this cost is pretty limited, you might considering insuring your investment, or you can even deposit your bitcoin in the BAKKT warehouse, that might charge you a cost for that.
• You are actually exposed to a credit risk versus the exchange: if the exchange defaults, you are holding a bitcoin versus nothing (in case you didn't deposit it in the warewhouse,, but this is adding another layer of complextiy not worth analysing here. Regulated exchanges are amongst the most liquid institutions in the financial markets as they carry very little risks due to margining of their positions.
• We didn't account for financing, margining and managing cash positions. Again I don't think they are goind to add much to this analyis.

Again on Bakkt Open interest.
They are now widely available at skew.com

Bloomberg added BAKKT to their Professional service Bloomberg terminal.

From here you can observe Open Interest, an information that is not widely available until now, as far as I know:
 



We see the rise in the volumes we observed in the last 10 days, probably due to more FCM (Full clearing members) onboarding in their warehouse, also was accompanied by a rise in the open interest.
72 lots of open interest might not look huge, compared to trading volumes, but probably is natural for a startup phase and due to the high volatility of underlying.

It is not weird to be afraid of bitcoins price, everyone should be afraid of the price at all times when it is low or high, it is not the part where you are afraid you should be worried about it should be the lack of bravery when going into bitcoin, bravery is not the state of "not being afraid of anything", no, bravery is being afraid of something but doing it anyway because you want to, that is when you are brave and if you are not brave in bitcoin market then I am afraid you will never make money.

You should be afraid and you should accept the fact that you will never know what the price of bitcoin will do and still invest anyway no matter what. Those type of people do lose money sometimes but they are also the ones who make the most profit out of crypto trading.

Speaking of Commitments of traders.
There are many informative websites that periodically update and do analysis on this official document.
One of this is www.skew.com


This is the total Volume and Open Interest chart over the past weeks:



This is the current Open Interest broken down to individual investor category



This is the change in Open Interest broken down to individual investor category



We see the open interest is now around 16,500 lots, with a weekly variation of -4,150 (down 20%).
The category that reduced the most the open interest is the leverage short. So they bought back some short they opened.
This can be interpreted in two ways:

• BULLISH: the short closed their positions, the selling pressure has ended and there's now space for a rebound. 
• BEARISH: the short reached their target, so they are not willing to buy the market in case of another leg down. Without buyer next leg down hence next movemement down could be bigger.

This is an interesting question.
As I wrote in the OP at launch of CBOT futures the term structure was in contango.  Of course the interpretation of this being a "forecast" of future prices is totally wrong, as I have explained.
Term structure shape is definitely something to look after.

Extremely informative read.

My only real query that I'm still baffled by is that why anecdotally, BTC futures only exists in contango and never really in backwardation? Given the fact that there isn't really much of a cost of carrying BTC (you can just chuck it in a cold wallet and forget about it until maturity), is it solely due to market expectations of BTC price?

Dabs is right though, this ain't beginner stuff, but it's what intermediate traders desperately need to read even if they're just trading perps, imo.

Bitcoin is legal in the US and never has been banned in China.
Please don’t spam this thread as we are all trying to learn things, not earn a few Satoshi per post.
Thank you.

Fantastic summary, fillippone.  Before becoming interested in crypto I was extremely interested in the stock market and so was familiar with options, futures, and other derivatives.  But I much preferred buying individual stocks outright instead of just betting on price movements, which is what futures are basically all about. 

Futures also don't provide any income through dividends or any other benefits an investor gets by stock ownership.  Its important that new traders realize this.  Hedge funds and the rest of wall street use derivatives to hedge their positions, but I think its difficult for the average individual trader to make money with them (I could be mistaken, tho).

This all makes me wonder if any wall st firms are really getting into bitcoin by utilizing Bakkt.  Reports around here seem to suggest that this isnt the case, but somehow I can't imagine investment firms not wanting to make money with crypto.  When its hot, its hot and there's a lot of money to be made.  Bet you when bitcoin starts accelerating toward $20,000 and past that to a new all time high, volume on Bakkt will explode.

This is it. Thank you OP for your initiative and effort in putting up such a long and sophisticated explanation of the overhyped Bakkt futures exchange. A lot of members are definitely hungry of this explanation, not just newbies for sure but also those with higher ranks, as high as legendary. Take note that high rank members are more afraid and shy to ask questions than newbies. And since you've read our minds, this thread is begotten.

The term "futures" is one of the most important keyword here and you've clearly explained it. Great job!

Ok, understood, thanks for your feedback.
Due to your inputs, I am going to move this thread in the Economics Board then.
Hopefully that board is more suited to this post and beginners will eventually find their way to this thread.
 

After I have read the OP and later all comments in this thread my first thought about the proper section for such a detailed article was the Economics board.

There are already a couple of threads about Bakkt just like this one quoted above. I am sure this very detailed article is too overwhelming for beginners and even more, advanced traders have to read it a couple of times to understand the BTC futures subject correctly. One has to have already a lot of trading experience with multiple BTC products to understand all these technical details.

I just want to add that this is the best explanation of BTC futures I have read on Bitcointalk so far. I really have a lot of respect for the author's knowledge.