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.
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.
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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.
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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.
