3 ms·
Usually there isn't any risk in this scenario but thanks to cboe rules that cap volatility at 20%, there is quite a bit of risk hidden here. Say, you buy btc an
by option_greek 9y ago
Usually there isn't any risk in this scenario but thanks to cboe rules that cap volatility at 20%, there is quite a bit of risk hidden here. Say, you buy btc and short the future. If btc drops by 30% in a day, future trading will be halted at 20% which means that you can lose money if it is an expiry day. Also, CBOE and your btc exchange aren't linked. So you will have to put up additional margin when btc goes up and your future is losing money.
- meritt 9y agoExpiry day is going to be very interesting then. I had no idea their volatility rules would apply to expiring contracts too, that's insane. Why would anyone want to trade that instrument?
- option_greek 9y agoI wish I know :). Its not really a derivative if volatility is capped while the underlying is free to move around.
- snowAbstraction 9y agoJust some kind of capped option.
- dresstotheleft 9y agoThis is how all future contracts work. There are daily limits that lock the contracts from trading. Interestingly enough these contracts seem to have very high margin requirements and lock limits. I also find the discussion about "shorting" to be interesting. All futures contracts have 2 position - a long and a short. The number of "shorts" is identical to the number of longs, unless I am misinterpreting the was these contracts are set up.
- where_do_i_live 9y agotrading is halted for _minutes_ 2min then 5min... hardly an earth shattering pause.