Topic: ICBIT Derivatives Market (USD/BTC futures trading) - LIVE - page 44. (Read 97688 times)

SECURITY AT ICBIT.

Hi.

I am a little worried about security at ICBIT.  Unlike traditional exchanges, where I pull my btc out as soon as I have bought them, on ICBIT you need to have money in your margin account for an extended amount of time.  That increases the need for good security, both against my account getting hacked and against the ICBIT site getting hacked.

It is very difficult to judge how focussed ICBIT is on security.  But they do not offer two-factor authentication, that is a bad sign!  If my computer is hacked, so will my ICBIT account be.  Two-factor auth should be possible both on login, and on withdrawals, either using yubikeys or google authenticator.

But what about the site security?  The security stuff they mention on the front page appear a bit minimal.  They use https and salt the passwords.  Fine, my password won't be easily recovered if the site is hacked (unlike Linkedin  ).  But all coins will be gone ?

What fraction of the bitcoins are in cold storage?  In my (slightly extreme) opinion, ICBIT should not use a hot wallet at all!  All money should be stored offline, and it should be clearly written on the web page that bitcoin withdrawals take one business day for this reason.  Then I would trust them (more).

Remember, it is not a question of IF the site is hacked, but of WHAT happens when it is hacked! 

Sorry for being so negative, but the bitfloor f***up was a bit scary.   And in some ways ICBIT is the successor of Bitcoinica, hopefully not in too many ways   

Ok time to give this baby a try

No, just as with BTCUSD futures you'll receive your profit/loss in BTC.

very much appreciated, we need more anchor points outside the Bitcoin ecosystem.


Technical question out of curiosity: how do you plan to implement the "settlement" of those futures?
I take it, that at settlement time, the seller isn't expected to send a truck with oil to the buyer 

Oil and Gold futures will be nominated in BTC.

Will that be XAU/USD or XAU/BTC ?   (or, for example for Brent crude ... OIL/USD or OIL/BTC  )?

Also, ... get to it!   OIL is going up!   

It's more than that.

First of all, your calculations rely on the market behavior and contain typical comparation of past actions based on current market state.
For example, I really would say that I should have bought some BTC @ $3 because I see it trades @11 now. However, back then, when BTC was trading close to $3, I was not that sure it would reach $11 by now.
Same applies to your judgement: What if futures market would rise higher and thus give you ability to sell @ 14.7 for example? In fact, it rose some day from exactly following the spot rate to a higher value (contango), so this is easily possible (the futures trading chart will be live quite soon so everyone could see historical data).

Next, yes, it's about "leverage". It's a personal decision of every trader to choose risk ratio. Obviously, ICBIT clearly advises against using full leverage, nevertheless, your 3 BTC in the account could be used as a guarantee for almost 40 BUZ2 contracts worth of $400. Your gain would be:
(1/12.99 - 1/13.50) * -10 * 40 = 1.7016 BTC - 40 * 0.05 = 1.5016 BTC. That's quite a difference!

And last, but not least. When you exchange currency on the spot market, you're buying and selling Bitcoins in favor of US Dollar or other fiat currency.
For the growth of Bitcoin economy, Bitcoins must get actually used more and more, and not just exchanged back and forth.
This is one of the things where the futures market comes into play. It gives a way to really use Bitcoins. Right now, the usage is limited to BTC/USD value speculations, hedging the risk of value fluctuations and arbitraging between spot and futures market, however when gold, oil and s&p500 futures are added, opportunities would greatly increase.

I was demonstrating ICBIT to someone who, like me, occasionally does trading on the exchanges but did not previously have experience trading futures contracts.

The first question was one that I had ... why would you risk going long when the contract already trades 15% higher than the spot market?

And, of course, the answer is ... leverage.   If I am right in predicting the direct the exchange rate will move, I can gain more by buying BUZ2 contracts and use some of the leverage it offers  than I can by simply using those same funds and buying bitcoins at an exchange.


Here's my most recent trade:

Bought 5 BUZ2 contracts at $12.99:

2012-09-11 105 Buy                         BUZ2     12.99   5
2012-09-11 105 Trading fee for trade id 6  BUZ2    -0.025


Since that time (but before selling) I received variation margin adjustments

2012-09-12 105 Variation margin            BUZ2     0.02355995
2012-09-13 106 Variation margin            BUZ2    -0.0057161

(net variation margin adjustments:  0.01784385 )


So then I sold 5 contracts at $13.50 (it was a limit order and sold 2 first and then 3 more later):

2012-09-14 107 Sell                        BUZ2     13.5    2
2012-09-14 107 Trading fee for trade id 13 BUZ2    -0.01
2012-09-14 107 Variation margin            BUZ2     0.05102684

2012-09-14 107 Sell                        BUZ2     13.5    3
2012-09-14 107 Trading fee for trade id 12 BUZ2    -0.015
2012-09-14 107 Variation margin            BUZ2     0.07654026



Adding these all together I received 0.14541096 in margin adjustment but lost 0.05 in trading fees with a net gain of 0.09541096.

I didn't use the full margin available as I want to lessen the chance of seeing forced margin selling.  So I had 3 BTC leveraged to control 5 BTC worth of BUZ2 contracts.

I calculated my ROI of the 0.09541096 gain on roughly a 3 BTC investment and get the result - a 3.1% gain.

Had I bought straight BTC at the spot markets during the same time, I would have bought 3 BTC (the BTC/USD at the time was $11.10), and today sold at about $11.70.   The gain on that would have been $0.60 per BTC less fees of about $0.11, netting an ROI of 4.4%.

[Update: I needed to recompute the above numbers after making an error, including a variation margin twice.  With this specific trade I made less than had I traded on the spot market.   This is because the rise in the futures contract was less than the rise in the spot market over the same period, plus my price that I bought was at the upper range of the spread, as was my selling.]

Of course, the leverage knife cuts both ways.   I've also done trades on ICBit where I've speculated on the wrong direction, and lost more than I would have had I simply traded at an exchange where I was not using any leverage.

But I thought I'ld share this trade just in case it helps anyone wishing to see the numbers for an actual trade.

I understand this is annoying, but please understand us too, it was done for security reasons when the exchange just started operating.

This limitation will be removed in the nearest future with the next major software update being deployed.

Yes, that's right.

Do I understand it correctly that the price used to settle the account every day is the icbit futures market price, and the only time the "average price of the largest market" comes in is when the contracts expire at the end of december?

yeah, i hate that too 

Hi, what's the story with this one:

I tried to withdraw some BTC and got this error:

"Please cancel your active futures orders before withdrawing Bitcoins!"

so I cancelled my open futures orders, but then got this error:

"Please close your open futures positions before withdrawing Bitcoins!"


Do I really need to cancel all orders and close out all open positions to make a BTC withdrawal?

very much appreciated...

Let's have a look at two different scenarios, when you start from scratch - only having some BTC in your account and then
you buy one contract at $13.20. The information is stored in the system that you hold 1 BUZ2 contract which you bought at $13.20.

Then, either one of two options:
1. You manage to sell it within same day (same trading session) at $14.00. As a result of closing the position you get:
VM = (1/14.00 - 1/13.20) * (-10) = 0.0429 BTC, which are added to your account (and 0.005 BTC deducted as trading fee).
2. You hold the position overnight. Let's imagine that last trade between someone happened at 19:57 GMT at $14.00. Then, during the clearing your account is credited with 0.0429 BTC, and the "exec" price (or, we can call it a "base" price) is set to 14.00. So at the start of the next trading session, it's equivalent to the case if you would sell your contract at 14.00 and then bought it again at the same price (of course, no trading fees are deducted for holding the position overnight).

Very simple, it's the price of the last trade, or if there were no trades for long enough time, it's a middle point between current best bid and ask. I will put a so-called "ticker" atop of the webpage, which would show current last price, open price, high and low, etc.

And the BUZ2 contract shows:


I'm trying to learn the calculation for variation margin, specifically which prices it uses.  The contract shows:


Let's say today I don't yet have a position open and I buy one contract at $13.20.  Does the price used for "Exec(ution) Price" then show the same as if I had already held the position opened a previous day?  (i.e., set from the last 20:00 GMT clearing?)

If so, is there a way for me to know what this last clearing price will be without me already having a position open?

1. Yes, the mechanism would be "real", which means trading will stop, Last Price will be set to that calculated according to the contract specification, then all open positions will be closed using that price to calculate variation margin.
2. Because of that, trading participants will try to "arbitrage" this fact and will move the price quite close to that value before trading stops.

Good point.
How would that "settlement" in this hypothetical case be processed then?
Would you just "force down" the futures rate at 15.Dec. to $9.75 and thus Stephen would earn the variation margin?
Or is there any other "real" settlement mechanism in place, which would be triggered at 15.Dec, when the BUZ2 is due?

just a question out of curiosity...
Thanks

Yes, the work on providing realtime chart of the actual OHLC data is already on the way and will be deployed soon. As for historical data export, this is going to be the next step.


Thanks, the time should be synced to NTP, I will doublecheck to be sure.

Hi,

I just want to confirm that I am understanding something correctly here:

Is there any way from the Web Client to view trading history, high-low, last, volume, open interest, etc. for the futures contract?

I see a nice graph there beside the order book on the Futures tab page, which is labeled "Chart (BUZ2)", but it looks like that is actually the historical prices of the underlying cash exchange market (from ICBIT's market only).

Thanks!

ps: the UTC time at the top of the page given by your server seems a minute or two fast