Selling call options on your bitcoins - page 2.

TwinWinNerD

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Quote from: JackTackett on August 05, 2014, 05:37:18 PM

Quote from: right wing authoritarian on August 03, 2014, 06:45:30 AM

I just sold a call option to a forum member. Deal was by private negotiation. It is not that hard.

Curious as to how you all priced the option? What sort of assumptions etc. I am assuming given the unknowns using something like Black-Sholes would not be useful.

Thanks,
Jack

If you are intersted in pricing BTC options, this thread could be a good read for you!

https://bitcointalksearch.org/topic/options-trading-thread-557743

JackTackett

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Quote from: right wing authoritarian on August 03, 2014, 06:45:30 AM

I just sold a call option to a forum member. Deal was by private negotiation. It is not that hard.

Curious as to how you all priced the option? What sort of assumptions etc. I am assuming given the unknowns using something like Black-Sholes would not be useful.

Thanks,
Jack

galbros

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Quote from: right wing authoritarian on August 03, 2014, 06:45:30 AM

I just sold a call option to a forum member. Deal was by private negotiation. It is not that hard.

Excellent. I agree the deal is not hard, the only issue is their confidence in you to deliver. I know you don't want to give away any details, but in general terms how you handled the "trust" aspect of the arrangement would be helpful.

Good Luck!

right wing authoritarian

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Quote from: Mobius on August 03, 2014, 05:44:46 PM

Quote from: arbitrage001 on August 03, 2014, 07:26:59 AM

Quote from: right wing authoritarian on August 03, 2014, 06:45:30 AM

I just sold a call option to a forum member. Deal was by private negotiation. It is not that hard.

Mind posting the deal in detail? You don't have to disclose the name of the person.

+1 on this. Deals like this should really be done out in the open. It would give greater transparency and allow for the community to get a better understanding of the BTC economy.

It is really at the discretion of the client whether or not details are released. I may post implied average volatilities if I end trading with enough people to get a reasonable stat.

Mobius

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Quote from: arbitrage001 on August 03, 2014, 07:26:59 AM

Quote from: right wing authoritarian on August 03, 2014, 06:45:30 AM

I just sold a call option to a forum member. Deal was by private negotiation. It is not that hard.

Mind posting the deal in detail? You don't have to disclose the name of the person.

+1 on this. Deals like this should really be done out in the open. It would give greater transparency and allow for the community to get a better understanding of the BTC economy.

arbitrage001

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Quote from: right wing authoritarian on August 03, 2014, 06:45:30 AM

I just sold a call option to a forum member. Deal was by private negotiation. It is not that hard.

Mind posting the deal in detail? You don't have to disclose the name of the person.

right wing authoritarian

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I just sold a call option to a forum member. Deal was by private negotiation. It is not that hard.

blumangroup

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'Slow and steady wins the race'

Quote from: TwinWinNerD on August 02, 2014, 03:34:23 PM

Quote from: poisenrang on August 02, 2014, 03:15:26 PM

what is the collateral?

Full collateral. So for a 1 BTC option, the collateral = 1-Option Fee

You would still need to have the entire amount (the full 1 BTC) held by escrow in order for the buyer to potentially be safe. Even still both the buyer and seller would need to place massive amounts of trust in the escrow service as this would be a very long term deal. Escrow is trusted today because the transactions are very short term (the time it takes for goods to ship) but there are a number of things that could happen that would cause escrow to no longer to be interested in/involved in bitcoin/these forums.

TwinWinNerD

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Quote from: poisenrang on August 02, 2014, 03:15:26 PM

what is the collateral?

Full collateral. So for a 1 BTC option, the collateral = 1-Option Fee

poisenrang

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what is the collateral?

arbitrage001

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Quote from: Mobius on August 02, 2014, 01:54:35 PM

Quote from: arbitrage001 on August 02, 2014, 05:15:46 AM

I will offer strike price of 1000 and 1200 call for the following date if anyone is interested:

March 31st, 2015
June 31st, 2015
Dec 31st, 2105

Price will be determined at the time of the dealing. Might be willing to do deal for other date and price, but only in bitcoin (no alt coin).

Send pm in interested.

How would you settle the 2105 strike price? It is not possible to force someone to assume debt when you die, so there would not be anyone to ask to payout at this time.

Another issue is that it would be very difficult to enforce this contract as you cannot seize bitcoin from someone. If you were to use escrow, the escrow would need to hold massive amounts of bitcoin from you because of your unlimited exposure.

The 2105 one is a typo, should be 2015.

But the risk of death is real. If there is a need for assurance, I can make arrangement with trusted exchange regarding any deal I have with buyer here.

As for the liability part, TwinWinNerD already explain it. I only need 1 bitcoin to cover each call I wrote. So there is no risk of insolvency on my part. In fact, since the premium for long dated option is high, and I am getting paid in bitcoin, the higher bitcoin go up, the better off I am.

TwinWinNerD

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Quote from: Mobius on August 02, 2014, 01:54:35 PM

Quote from: arbitrage001 on August 02, 2014, 05:15:46 AM

I will offer strike price of 1000 and 1200 call for the following date if anyone is interested:

March 31st, 2015
June 31st, 2015
Dec 31st, 2105

Price will be determined at the time of the dealing. Might be willing to do deal for other date and price, but only in bitcoin (no alt coin).

Send pm in interested.

How would you settle the 2105 strike price? It is not possible to force someone to assume debt when you die, so there would not be anyone to ask to payout at this time.

Another issue is that it would be very difficult to enforce this contract as you cannot seize bitcoin from someone. If you were to use escrow, the escrow would need to hold massive amounts of bitcoin from you because of your unlimited exposure.

Are you serious? It was obviously a typo.....

Edit: To your point: "Escrow would need to hold massive amounts of bitcoin from you because of your unlimited exposure."
This is completely wrong, as no matter how high 1 bitcoin gets, 1 bitcoin can never be worth more than 1 bitcoin. So for an option amounting to 1 Bitcoin, only 1 Bitcoin in escrow is needed.

Mobius

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Quote from: arbitrage001 on August 02, 2014, 05:15:46 AM

I will offer strike price of 1000 and 1200 call for the following date if anyone is interested:

March 31st, 2015
June 31st, 2015
Dec 31st, 2105

Price will be determined at the time of the dealing. Might be willing to do deal for other date and price, but only in bitcoin (no alt coin).

Send pm in interested.

How would you settle the 2105 strike price? It is not possible to force someone to assume debt when you die, so there would not be anyone to ask to payout at this time.

Another issue is that it would be very difficult to enforce this contract as you cannot seize bitcoin from someone. If you were to use escrow, the escrow would need to hold massive amounts of bitcoin from you because of your unlimited exposure.

arbitrage001

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Activity: 1067

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I will offer strike price of 1000 and 1200 call for the following date if anyone is interested:

March 31st, 2015
June 31st, 2015
Dec 31st, 2105

Price will be determined at the time of the dealing. Might be willing to do deal for other date and price, but only in bitcoin (no alt coin).

Send pm in interested.

davidgdg

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Activity: 552

Merit: 501

I'll do a little experimental play (option on 1btc 30 days US style strike 650 basis Stamp). Pm me if interested.

TwinWinNerD

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CEO Bitpanda.com

Quote from: arbitrage001 on August 01, 2014, 08:10:08 AM

Quote from: TwinWinNerD on August 01, 2014, 06:34:46 AM

Quote from: arbitrage001 on August 01, 2014, 12:51:13 AM

Quote from: TwinWinNerD on July 31, 2014, 08:47:09 PM

I am still very much open to writing call options (covered) for shorter terms (at max. 1 month). Just PM me or reply in the other thread and we can work something out.

(will probably only reply tomorrow though)

Covered call is same as naked put.

If you are trying to benefit from the interest portion, you can check out ICBIT on future contract.

As a bitcoin holder Naked short put is not the same as covered call.

Basically I would be levereging my losses when issuing short puts, while covered calls wouldn't influence my downside at all.

Observed from a "Zero asset" position, your argument obviously holds true, as the payoff of both should in theory be the same.

Additional, I think that people pay a way higher than fair premium for calls, but don't do that for puts. You can see that on bitfinex, where shorting is nearly cost free!

Creating a new position to cover your existing asset is synthetically equivalent to selling your entire bitcoin holding and then naked shorting same amount of put. Risk and profit will be identical, only difference is the commission and the spread of the option.

If you already have bitcoin, assuming the spread on call and put are identical, then selling call to make it a "covered call" strategy is of course cheaper than selling all your bitcoin then shorting some puts.

Shorting bitcoin itself is entire different thing. It costs little to short because everyone is expecting the price will go to the moon. That is also the reason why it is hard to make a market for option. No one will pay for put while anyone that is risk caution will not write naked call, the spread on each call and put will make it impossible for risk neutral strategy called "box".

Exaclty! Well said.

And about Icbit, you can kinda simulate options, but in the end only options work like options. That's why I'd prefer to issue Calls myself. I don't like futures really, but maybe I am on my own here Wink

arbitrage001

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Quote from: TwinWinNerD on August 01, 2014, 06:34:46 AM

Quote from: arbitrage001 on August 01, 2014, 12:51:13 AM

Quote from: TwinWinNerD on July 31, 2014, 08:47:09 PM

I am still very much open to writing call options (covered) for shorter terms (at max. 1 month). Just PM me or reply in the other thread and we can work something out.

(will probably only reply tomorrow though)

Covered call is same as naked put.

If you are trying to benefit from the interest portion, you can check out ICBIT on future contract.

As a bitcoin holder Naked short put is not the same as covered call.

Basically I would be levereging my losses when issuing short puts, while covered calls wouldn't influence my downside at all.

Observed from a "Zero asset" position, your argument obviously holds true, as the payoff of both should in theory be the same.

Additional, I think that people pay a way higher than fair premium for calls, but don't do that for puts. You can see that on bitfinex, where shorting is nearly cost free!

Creating a new position to cover your existing asset is synthetically equivalent to selling your entire bitcoin holding and then naked shorting same amount of put. Risk and profit will be identical, only difference is the commission and the spread of the option.

If you already have bitcoin, assuming the spread on call and put are identical, then selling call to make it a "covered call" strategy is of course cheaper than selling all your bitcoin then shorting some puts.

Shorting bitcoin itself is entire different thing. It costs little to short because everyone is expecting the price will go to the moon. That is also the reason why it is hard to make a market for option. No one will pay for put while anyone that is risk caution will not write naked call, the spread on each call and put will make it impossible for risk neutral strategy called "box".

TwinWinNerD

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CEO Bitpanda.com

Quote from: arbitrage001 on August 01, 2014, 12:51:13 AM

Quote from: TwinWinNerD on July 31, 2014, 08:47:09 PM

I am still very much open to writing call options (covered) for shorter terms (at max. 1 month). Just PM me or reply in the other thread and we can work something out.

(will probably only reply tomorrow though)

Covered call is same as naked put.

If you are trying to benefit from the interest portion, you can check out ICBIT on future contract.

As a bitcoin holder Naked short put is not the same as covered call.

Basically I would be levereging my losses when issuing short puts, while covered calls wouldn't influence my downside at all.

Observed from a "Zero asset" position, your argument obviously holds true, as the payoff of both should in theory be the same.

Additional, I think that people pay a way higher than fair premium for calls, but don't do that for puts. You can see that on bitfinex, where shorting is nearly cost free!

nyan1

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bet on binary options, similar

http://www.btcbins.com

arbitrage001

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Quote from: 2dogs on August 01, 2014, 02:32:34 AM

Quote from: arbitrage001 on August 01, 2014, 12:51:13 AM

Quote from: TwinWinNerD on July 31, 2014, 08:47:09 PM

I am still very much open to writing call options (covered) for shorter terms (at max. 1 month). Just PM me or reply in the other thread and we can work something out.

(will probably only reply tomorrow though)

Covered call is same as naked put.

If you are trying to benefit from the interest portion, you can check out ICBIT on future contract.

arbitrage001,

Are you using ICBIT currently with success?
Feedback on this forum about ICBIT haven't been exactly stellar:

https://bitcointalksearch.org/topic/icbit-254675
https://bitcointalksearch.org/topic/unofficial-icbit-btc-futures-trading-help-faqs-164255

Yes. Heard the accusation on manipulating settlement price on closing date.

This is true for any exchange, be it bitcoin, commodity and currency future/option on contract settlement date. The only thing differ is the players (could be either exchange, market maker, suppliers or the speculators.)

I am only interested in the interest rate component of the contract, and I don't wait for the settlement date to close out my position. So the scam/cheat, if exists, do not really have any effect on my trading strategy.

One thing I am not happy with ICBIT is the withdrawal. They don't pay network fee so withdrawal confirmation takes anywhere from 4 to 12 hours.

EDIT:
For the bucket shop accusation, it has no effect on me as I don't use leverage and hence zero chance of force liquidation.

Topic: Selling call options on your bitcoins - page 2. (Read 4337 times)