Topic: Naija Novice Hangout {Newbies introduction & Orientation} Thread. - page 135. (Read 1024511 times)

https://bitcointalksearch.org/topic/m.52572357

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With Bakkt Futures launch, I see say plenty people for here dey ask say wetin be the meaning of future, or dey no really understand  am or e dey confusing and dey see am as another thing wey e no be.
I go try explain some things for here in a way wey e go easy with real life example and I go dey use BAKKT and CME bitcoin futures when I fit or I go use other examples.

Futures na arranged financial agreement wey dey make the pesin wey dey buy am (or sell am) fit buy (or sell) property (called underlying asset); like raw materials or document wey get value for the particular date or price wey them don already know before e reach.

Example we fit check na:



If I buy BAKKT future for 7,942.5 means say based on the  expiry date wey we agree on wey be Oct. 17th 2019 I suppose buy one single bitcoin from BAKKT warehouse for the price of USD 7, 942.5 . The delivery date go be the next day wey be Oct., 18th 2019. I fit trade  this future till Oct 16th 2019.

The same thing if I sell BAKKT future at 7,942.5 means say on the agreed expiring date, on Oct., 17th 2019.  I suppose to sell one single bitcoin from BAKKT warehouse for price of USD 7,942.5

For this picture you go see all the important date for a future:

• FTD (First Trade Date): This na the first day to take start to trade the agreed future.
• LTD (Last Trade Date): This na last day wey you get to trade the agreed future contract.
• FND (First Notice Day): This na the first day when exchange go tell holder of long future position about the delivery of underling assets (The underlying assets for here now na bitcoin).  Na still the first day when exchange go tell holder of short future say time don reach to deliver underlying to the place wey he suppose deliver am.
• LND (Last Notice Date): Na the last date when exchange and holder go take do all this things wey we just talk for up.
• FDD (First Delivery Date): This na the first day wey exchange fit actually transfer the property of the underlying asset to the long future position make e reach the delivery point (that is Bitcoin for BAKKT warehouse).
   first date when the exchange can actually transfer to the the long future position the property of the underlying asset at the delivery point (in this case the Bitcoin at the BAKKT Warehouse).
• LDD (Last Delivery Date): Na the last day wey the exchange fit can actually transfer property of the underlying asset to the long future position for the point of delivery (na the bitcoin for BAKKT warehouse).  For this one na FDD and LDD go together.
• FSD (Final Settlement Date): This na the final day when the future position holder and exchange go take make payments.

For example, the WTI future at the CME tell us say underlying asset for the following definition wey we see for the
Futures contract explain say the quality and quantity and the point of delivery of the underlying assets, their standard na based on how they trade them on exchange e day very important say the asset wey we trade at the end of the future go get e own quality and quantity.  E fit easy for document wey get value make  e can hard well for raw material (Physical commodity).  For AAPL shares day equal while barrel of oil dey they different due to many qualities.

example: the WTI future for the CME explains say underlying assets together with the explanation wey dey the contract.contract specification:


You see say explaining the quality of barrel of oil hard pass explaining the underlying asset of BAKKT future.:


    For here we get difference with CME future, while future contract dey control 1 Bitcoin, 1 future  for CME dey control 5 Bitcoin


so while BAKKT future get nominal value of around USD 8,000 CME future get national value of 5* USD, 8000 = 40,000

Also the size of contract wey affect smallest price movement: as the value of contract take low, na so the smallest price movement go take low(tick value):

BAKKT

CME:
This means say BAKKT contract fit move from 8,000 to 8,002.5 meaning say who hold one contract go gain 2.5 USD, while CME future fit move from 8,000 to 8,005, meaning say who hold the contract gain 25 USD.

No be by force to deliver the underlying asset.  

For stating, differentiation between futures na the one wey day between physically settled and cash settled:

According to Wikipedia (minor edits for clarity)


This na the first innovation of BAKKT future, wey dey physically settled, normally na the buyer of the future dem  dey deliver bitcoin to, while CME futures na cash settlement, meaning say at the end of the future, the dollar wey dey equal to the bitcoin naim dem go pay the holder of the future.  

For the point of delivery, we go see say WTI hard pass Bitcoin.

WTI:

BAKKT:


in short, BAKKT dey actually provide Client with warehouse (that is wallet) wey dem fit put there bitcoin to trade against their future.
   For real markets, the normal delivery rate of underlying goods wey dey futures contract dey very low only some of the future wey dem trade naim dem dey settle physically or fianciallly.  Most futures position don actually close or wey dem commot from before the future expire, perform opposite action, buyers (sellers) of the future buy (sell) the same quality of the same future contract wey go set off their position ward the exchange commot your position without say you carry the delivery of the future.

This carry us go another grammar for future volume again nas straight forward explanation.

Again from Wikipedia:

Volume instead is quite a straightforward definition:


Let's see an example:

• A sells a future to B: Total volume is 1, open interest is 1
• C sells a future to B: Total volume is 2, open interest is 2
• D sells a future to A: Total volume is 3, open interest is 2

For the last trade A close him position wey he pass to D: therefore the total position wey open for the market no change to 2

• B sells a future to C: Total volume is 4, open interest is 1
• B sells a future to D: Total volume is 5, open interest is 0

After those 5 trades (volume = 5) dey no get any open interest again, all position for the future dey closed, everybody  flat, no final settlement happen for the exchange.

For BAKKT we dey get information about volume only, no be for open interest (update): open interest figure don dey available for Bloomberg terminal. update).



On the 25th of September dey trade 131 contracts but we no know anything about how open interest change.

On the CME we get both informations:




For CME we get both information on the 256th of September dey trade 5,824 contracts  on the September expiry date Na 1172 contracts open tin total; 737 less than yesterday close (Normally dem no dey update OI on real times so both those figures relate to one day before, but you understand). E mean say na 737 contract less than the former close live for the market) wey dey fit deliver when future mature.



We fit use Futures hedge or speculate on the price movement of the underlying asset.

Day fit use futures guess or hedge the price movement of the underlying asset for example Bitcoin sensitive business (think of minner) fit use the future take reduce him profit dependency or bitcoin price movement, lock in some kind level of price go therefore, reduce risk and sell better quality of bitcoin futures.  In case bitcoin price go up, profit for mining go go up but loss for bitcoin future go affect am, therefore e go wipe the economic impact of that price movement of the underlying assets.
For the opposite case if bitcoin price decrease e go mean say less profits for the mining operations, but the short position for the future go carouse that kind size profit.
For the two case the, the final profit of the miner, the total of mining operations plus the profit/loss from the future position no go dey affected.
This process na hedging dem dey call am, the purpose of hedging no be to gain from favorable price movement  for the underlying assets, that is bitcoin, but to prevent loss from favorable price movement and maintain the price result wey dem don already see say dem go get: The miner go hedge himself from bitcoin price movements till e reach the same level of profitability wit bitcoin price case.  And yes e profit garus incase bitcoin  increase I but protect himself from any case wey concern say price reduce wey for actually end the meaning operation for the first place.

The second main use for future contract na speculation. To speculate means to gain untop the future position from movements for the price of the underlying assets.  
If person for market wan speculate on increase for the price of the underlying assets for the future, he fit gain, if the buy future contract come sell am later with high price for the future market or gain from the favorable price difference and the spot market, once the future settle (to take delivery of the underlying asset after the settlement of the future con sell aim for the spot market.
The risk na to face loss in case of huge price movement., like say price fall for this case.  If e con end up say the price low pass how e be when dem open the future passion, the holder of long position gats buy the underlying asset for that price in that movement of trade inception can sell the underlying asset at lower price for the sport market, and like that he go loose.
For the opposite, person wey wan profit from lower price, go sell the future, he go gain well well from buying at lower price to settle the future con sell am at the higher price wey dem first talk  to the holder of the long position of the future.


Make we look the futures wey CME recently quote?
 

Listed Contracts

Quarterly contracts (Mar, Jun, Sep, Dec) listed for 2 consecutive quarters and the nearest 2 serial months.

In fact the quoted contracts na the following:

FUTURE	MONTH	LAST TRADE DATE	PRICE	OPEN INTEREST
BTCV9	Oct-19	25/10/2019	8275	2142
BTCX9	Nov-19	29/11/2019	8290	248
BTCZ9	Dec-19	27/12/2019	8360	943
BTCH0	Mar-20	27/03/2020	0	0

      

September expiry just expire wen dem write am so the two main cycles expiries na Dec 19 and Mar 20 (dem quote am, dem never trade am) while the serial ones na Oct 19 and Nov 19.
We remember say the bigger open interest dey for the front contract, while the serial contract get little interest and the last serial contract too new to get any opening interest (na only few hours ago dey quote am).
If we check the prices we go say those one dey rise; the calendar spread (the difference between prices for different expiries )na positive. person go think say this na one kind market expectation of easing bitcoin prices between today and December
Well, e dey wrong!
The best expectation for the price wey dey the future na the spot price as e join all the public information we dey make available to price also future prices.  If I dey sure say price of bitcoin go rise in one year, or if I just expect an to rise, I fit just buy bitcoin make the price rise, then move the sport price closer to the future price.  This na non-arbitrage condition wey link price of the same asset different times.
The future price suppose always dey sometime like that.

center]Future prices = spot price (1+ risk free rate) + cost of carry – convenience yield. [/center]

Make we see wetin e mean

Spot price: as we don see the best estimate for future price na the sport puree,  because all the public information about the future don already get discount for market price. (semi-strong market efficiency à la Fama).
Funding costs: represented by parte (it risk free rate): to buy bitcoin and trade future require transiency the position low interest rates wordwide wan hold down the importance of this factor, wey suppose be cost and therefore wan increase the future prices.
 cost of carry: or cost of holding bitcoin until the future mature, this na wetin mainly dey make the slope of the future price weather upward or downward dey slope.  Cost of carry na the cost for storing bitcoin e fit low for bitcoin compared to other future underlying assets (thing of a say you store bitcoin instead of gold, or barrel of oil) but las las we no fit the way insurance e cost and storage for insurance level all together if I get any cost to store my underlying assets, E mean say the future price wey I want sell the asset go high pass the spot, to compensate for that kind cost, therefore push future price up.
The convenience yield na the value of getting the availability of use of the underlying asset until future maturity, E dey particularly relevant for financial assets to represent the coupon or dividend paid from spot date till future maturity. They fit think am like negative cost of storage some kind of income for strorage, or profit wey dey come from holding the assets itself.  For Bitcoin case the convenience yield fit come from earned interest wey come from borrowing my bitcoin to exchange or third party (think of blockFI) if I earn interest say I borrow my bitcoin to BlockFI I fit on my own buy them spot con sell them for the future below current market price, if the interest dey more than compensated by interest earned.

The reason why future price show positive (or negative sloping shape gats to do with the cost of carry of the position and the convenience yield: if convenience yield low pass cost of carry, think of any physical commodity, then the future curve go show contango, while if na the convenience yield high pass cost of storage (this na true for many financial asset future ) them the future price go dey characterized by backwardation.
   The shape of the curve still fit change over time as e dey contango today, no be so e ben dey for backwardation for the time of url=https://www.newsbtc.com/2019/01/16/etoro-market-update-bitcoin-in-backwardation-this-is-fine/]CME/CBOE future launch[/url].  E good make dem think of wetin dey push the slope of the curve for this kind mixed nature underlying like bitcoin.


Every exchange get community of traders report where you fit gut idea on the positioning of players for the exchange.
   The commitment of traders report bitcoin futures for CME (the only one wey dey important now) we fit find am for here link so we fit dey select Equity Indexes, then Cryptocurrencies and finally Bitcoin to make am Underlying:



E go good make una read User Guide this guide e explain all the technicalities of how dey make this chart but here I go tell you the main thing:

Yes the total open long position dey equal to short position.  If we look aggregate qualities open interest equal to the sun of longs (or shorts) + spread positions.
E dey clearer if we look breakdown by table:



And yes different players get different way we dem dey take trade, so to know if they long or short fit help somehow.

The one wey sweet pass na to study the evidence of long/short balance, volume and open interest, e fit give us hint on how the positioning of players dey affect the price action.

• BAKKT Futures Contract Specifications
• CME Bitcoin Futures Contract Specs

Another couse wey I for like make you check na this CME own.

INTRODUCTION TO FUTURES: Definition of a Futures Contract

This na actually very complete course on future e go give give better explanation uses, and all the implementation details for CME.
   This post na only beginning version wey cover some few topics.

  I fit go deeper or cover other topic normal some topics  dey wey I fit explain well well.

list]

• Term structure (contango/backwardation)
• Margins on the open positions (Initial margins/Variation margins/Marking to Market)
• Commitments of traders example

   I dey open to your suggestion to improve the thread, tell me how I go take improve this post.                             

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What prompted my curiosity to translate the named article/post to the Pigin version was the challenge I took upon myself for Africans to have a taste of the inspiring post in our own comprehensible language. This will ease the grammars that is been used in the original post and aid individuals that might find it difficult to understand mere vocabularies.

NOTE:   I decided not to translate the quoted words not to alter the exact meaning.
I spent 62 hours to round up this translation and I will be looking to translate more valuable articles/posts like this one.
   

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Thanks @fillippone for this opportunity to explore your thread once again.                  

My brother how tinz, two day we no hear from ur side for this we way hop say every bam bam. Back to the matter of companies relocating from 9ja to other African countrie the thing tire me oooo for waiten you want make those companies do when there is no enabling environment for their business to grow, the one were tire me be say while Ghana ban use of other currencies within there country, foreign airlines for 9ja no dey collect naira only dollars can be used for payment for air tickets this obviously show the extent 9ja have fallen in international recognition. Our currency is dead and among the worst globally.

One thing wey go they this matter self, na politics, even if they reach to make their own digital currency, they will do it in such a way that them go benefit from it, and there will not be a full regulation regarding the matter.
And this Government bodies go they raise issue wey even them selves never agree on so that after setting some rules them go begin they get issues.

As we go always talk, Nigeria never reach the level for them to own their own Crypto-currency, regardless if it where to be about how many active Crypto-currency enthusiast wey dey for Nigeria then I go say maybe, but if it a digital asset that would be handled by the set of government we already have in the country then I go talk say it’s going to be a total failure, Nigeria has a lot of economical and financial issues that it’s yet to be able to handle even if it’s the the nearest minimum and to compound issues we have very corrupt leaders.

Persn way still dey put hope 4 naija govment, na encef e dey use play. Las las, dem go always break ur heart like olosho. I knw say we lack plenty amenities way be say on a normal, e 4 be watin we 4 dey njoy bt as e be now, we still dey far behind via say we no get system way dey check mate all did projects.
Evn d EFCC cef no dey function 4 govment matter, na G be dere wahala now. All these so called abandoned project no suppose b d case via say, budgets dey come with supplus normally nd still, dem no dey complete am. Anoda bad tin be say, our polticians no believe say dem suppose continue abandoned project. Na why dem fit dey come with same project every election year. D matter cast!

That Godwin of a man socks. Wetin fit that man na to lick Buhari ass. Thatan dey make me vex anytime I see him on social media or television. Godwin is dame clueless. Under his watch Naira has fallen drastically. He doesn't know what to do, no economically driven ideas.  The other time na Aboki Fx e blame for crash of Naira.
To crown him Mumu all, him go pick form. For sane country sef, CBN boss suppose dey apolitical. This one go buy form. Him suppose resign sef because those election materials wey deh dey for CBN no dey safe again.

70 years old man, na to put charge for crypto transaction be your problem. All this money you and your agents (Access, UBA, Fcmb and all banks) dey cut us no do una.

After so many failed promises from candidates who we expected so much from, it is only natural that one would not feel too optimistic about the outcome of the next year's general elections. Maybe, the reason for your pessimism and indifference is that you do not want to get your hopes hopes up and have it dashed again just as they have done in the past. I have read lots of comments on the political side of social media and I can tell that Nigerians are wiser and better enlightened than we used to be. Candidates would have to do more tham promise good roads, constant electricity supply and whatever they used to promise the electorates in the past. I just pray the best candidate wins.

On a serious note, do you think "zoning" will continue for the big parties in Nigeria? Bcoz there's nothing one can do as long as a politician is willing to pay #100 million for presidential form for a party. I have registered for my pvc since last year. I went to inec office last month for collection and I was told it is not ready! That it is yet to arrive from Abuja. Imagine that! I suspect " foul Play" !!!Corruption too much jare! Na only prayer go help us 4 this country! ONE LOVE

Of course that is not a problem for me my bro, i do not and have never practiced political apathy, i always vote, and i am going to do same again come next year's general elections. I just do not feel too optimistic about the outcome, maybe the problem is with me and i am just a pessimistic guy, or maybe you prolly share in my indifference and understand a tad bit of what my worries are. This coming general election is really going to be a pivotal one for our nation, Nigerians are already fed up, and i really hope whoever emerges as the winner actually does a good job or else he would struggle to keep the nation together, cause he would be under immense pressure.

As for me, i'm first off looking forward to the results from the primaries, the candidates are too many for the now, after the primaries by the end of this month nai we go know who and who we dey vote for. I personally dey vote person and not party, because if you still dey follow party, remember say all the party na the same.

Don't keep your fingers crossed when there is something you can do, get your pvc and be ready to choose one candidate, e fit nor dey perfect...but at least person wey go help small, Nigerian's dun suffer too much

No be lie wey you talk Coyster but we don confirm say na this government bad pass since Nigeria history. You sabi say one wey to take sabi government wey try na when food fit reach table but this one even old people dey node shoulder say God forbid. No be lie say the people wey want contest na same people but I still see someone wey I think say God fit make him own case no bad too much, the person wey I dey talk na from East. I no go call name for now.  

You sound quite sanguine about the outcome of the next general election, i am not trying to be a pessimist here, but i do not have high hopes about what is to come, when you even look at the candidates vying to represent their different political parties in the next general election, i sort of lose hope. I could be totally wrong with my thoughts, but it is what it is, and we all know what our dear country Nigeria is capable of.
We have been saying this for quite a long time now, hoping for things to get better over here, but it seems so far from us at the moment. Most Nigerians at this stage just wants to eke out a living for themselves and their family, cause as for the general economy, things do not look quite good, or doesn't look to be good anytime soon.

Una well don oo, I just want make we know say this government tire herself. Make this election comot this set of leaders make we still Know where God go carry us put. This government no take anywhere good, hypocrisy plenty. Them no want some and them go allow sponsor on that kind thing  Police follow for naija problem but I sabi say na somebody too no dey want do the right thing wey go make police ogas do better thing. We need vibrate mind wey no go dey worry person on cryptocurrency related matters.

Bros, make we keep our fingers crossed. I am sure e go better soon. No b today dem don dey do drama 4 naija. Nigeria! Good people, great nation!

Watin I dey grab from dis part of the tori for two be say, na watin dem go charge via company or organisation and individuals. E be like the 1st part na em be for organisations nd the last 100k na em be for individuals nd the whole tin go end say, SEC go use shadow cover you via ur crypto matter make you no for enter wahala if not, the restriction way dem been give still stand. Where d matter dey abit complicated na 4 d bank them side way be say, na only CBN fit give them go and dem never giv dem dat go. So, how dat kind thing wan be?
Na really SEC vs CBN as you talk am o @Charles-Tim.

With all sincerity, I did not really understand much from the news

It would be good if you have any direct link to the SEC crypto regulation. Or maybe I will check it later, but I glanced through the news on SEC website and I did not see anything like that.

https://sec.gov.ng/category/news/

But the main issue is for CBN to unban bitcoin and other cryptocurrencies. But, yet, we are not sad even as they ban it, CBN do not have the power of total ban, but just that crypto industry development is significantly affected.

Maybe this will lead to CBN versus SEC, Or maybe registered vendors and the likes will be under the protection of SEC. I just don't understand yet. We know Nigeria is politics and I believe the days of Godwin Emefiele in CBN is getting closer and neither will he won APC primaries.

Make we ask ourselves this question does the police even care about the law, many time we have seen the innocent go in for crime that they didn’t commit, even the may bribery way Dey go on for road is very much against the law but we have come to see that these things happen and they have become part of Nigeria, so in a nut shell I no really Dey happy with the recent crypto-currency law and I believe it won’t be effectively Carried out by the Nigerian police.

What is most important is the part the regulation stated that fees are charged from vendors who want to make their cryptocurrency transaction official and want to operate in that context, but the new regulation is silent on decentralized cryptocurrency transactions such as p2p so we are so good as a decentralized community but the ambit is on cryptocurrency freedom within the country and if centralized vendor such as Luno and Patricia e.t.c want to operate a cooperate organization their free to pay that fee and become a legal payment gateway system. It's left for the crypto user to either choose between decentralized and capitalization.

If what I read is correct, this only serves to demonstrate how foolish the CBN is and how little they care about the growth of crypto currency in the country; these new regulations only serve to expose their main reason for banning banks from participating in crypto transactions: it was all about money, not because crypto posed a threat to our local fiat and banking system. Instead of this dreadful new regulation requiring vendors to register with a ridiculous amount before using a bank for crypto transactions, they could have added extra charges to all bank crypto-related charges as a crypto tax.

What made them think we would pay such a high fee to conduct business with banks? Isn't this something we're already doing?  Man it's a lost battle... This CBN governor no get single sense for head, the same idiot want to contest for presidency.

Police go begin see this new law now as bad market for them because as e go empower them to continue to deh harass innocent crypto traders. But make I tell us say all this things na hypocrisy weh deh worry 9ja for this cryptocurrency matter, if no be that wetin be ban and regulations when Binance be a part of sponsors for Big Brother Naija. Una see how the thing be. Any which way, make them do free the youths make we for do our legit businesses.