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Call options used to bet that Bitcoin will go over $50K next year
- WheelsAtLarge 9y agoThat's more like a billion-dollar bet. Ask the Winklevoss twins.
- geezerjay 9y agoA single call creates yet another far-fetched mass media piece to convince unsuspecting fools to spend their money pumping up the bubble. And so the pumping continues. The more far-fetched the story, the closer the burst is.
- zeep 9y ago$50k is not really that far fetched... Bitcoin tripled in value so many times already, what's one more time?
- everdev 9y agoYeah, no one can accurately predict market futures. It's probably only absurd in retrospect if it doesn't come true. But there's no math that says it's unrealistic, especially with faith based currency.
- andy_ppp 9y agoThe is all currency, when people stop believing in a currencies value the exchange rate drops no?
- 0x006A 9y agoit's not the same if there is an army and a tax collector that help you 'believe' in a currency.
- geezerjay 9y ago> when people stop believing in a currencies That's a foolish comparison. Public servants are paid in the nation's official currency. Do you believe employees just forget about their salary? And I won't even talk about taxes and supplying the state with goods and services. Equating these so called "cryptocurrencies" with cash is simply idiotic, and something that only serves the agenda of those personally invested in defrauding the world while pumping the bubble.
- everdev 9y agoFaith based currency is a different beast. Money like silver coins can have utility beyond their exchange rate. For example, melted down and used to produce a physical item. You can't do that with paper money or a cryptocurrency. The utility of silver could still drop, but it's much less likely than someone deciding that a piece of paper or a token in a ledger is essentially worthless. That said, faith based money can skyrocket in value if everyone believes in it.
- FabHK 9y agoAlso, you have to pay your taxes in faith based money.
- geezerjay 9y ago> $50k is not really that far fetched... No, it actually is a ludicrous bet. No rational investor would ever make this investment. The absolute max value stands at less than a third of that. This sort of call only makes sense if it's designed to manipulate fools into a buy spree to supply liquidity to mask a massive cashout. > Bitcoin tripled in value Ah yes, and lightning will certainly hit the same person again and again. Do you happen to have any money on bitcoin by any chance?
- wellboy 9y agoYou were probably the same guy who shouted at $10, at $1000, at $10000 that it's gonna crash soon and that it's never going higher.
- y0ghur7_xxx 9y ago> The absolute max value stands at less than a third of that. Care to elaborate?
- FabHK 9y agoI assume GP means the highest value realised so far, and was a bit sloppy on his mental maths.
- Kiro 9y agoWhat do you base the "absolute max value" on?
- sundvor 9y agoThe transaction costs are going through the roof though, if you want half the chance of it going through in a foreseable time frame. What can you actually do with Bitcoin, then?
- scotty79 9y agoWhat can you do with gold bar you own?
- sundvor 9y agoGood point. Thanks.
- zeep 9y agoI don't personally use them, but you can use them to gamble online, black markets, transfer funds, etc.. much easier to move than gold (gold tends to be heavy, unless you get gold "certificates" or whatever they call them, then you don't even know if you really have real gold).
- jsjohnst 9y ago> what's one more time? That’s called gambling, not investing. Albeit many mixup the two concepts quite frequently, they are distinct.
- Tepix 9y agoThey paid $1m for an option for 275 BTC@$50,000. That seems quite expensive... if the price goes anywhere near $50,000 the emitting party could aquire those 275 BTC for less than $50,000 each and wait until the options expire.. am i missing something?
- vasilipupkin 9y agoLedgerx requires full collateral, so the emitting party had to have that BTC, but yes, seems quite expensive, but you have to take bitcoin volatility into the account. It could reach 50,000 in 2 days.
- FabHK 9y agoSure, the emitter could, say at $40,000, buy the 275 BTC. If the option expires in the money, the emitter would deliver the BTC, and receive $50,000 each, making a tidy $2.75m profit in addition to the $1m premium. But BTC could also fall back to $10,000. Then the emitter sits on a $8.25 m loss (minus $1m premium). That's really the issue. It's feasible that the emitter owns 275 BTC already (or more), and is happy to give up the upside beyond $50,000 on 275 of them for $1m cash now (in other words, he wrote a covered call). That's the most likely scenario in my view. (If you delta hedge, you could manufacture the call, and then are not so much exposed to the price of BTC, but to its realised volatility to expiry; the emitter would be short vol: if vol is higher than expected, they'd spend a lot on the delta hedge (due to gamma), if vol is lower, they'd spend less and make money.) It's
- deleted 9y ago[deleted]
- Kiro 9y agoIs this really a risky bet? I wouldn't be surprised if we hit $50k within a few months.
- knocte 9y agoIf I understood correctly the article, the bet expires this month so if by Jan 1st price hasn't hit the mark, he loses?
- Kiro 9y agoNo, it expires December 2018.
- ringaroundthetx 9y agoI don't consider that a risky bet, although I probably wouldn't have gone so high of a strike price, but high implied volatility does that to people. Either way, they can sell from month options to finance the cost of their back month speculation, bringing their cost basis to zero or even less. Now they would have a free trade that still has the whole upside potential, even better than a lottery ticket. And finally, if it doesn't look like the bet is going to pay off within the last 3 - 6 months, they can rollover the long contract into the December 2019 options, mostly financing the purchase of the new long dated contract. Options allow you to control risk, which is why it isn't inherently a risky bet.
- runeks 9y agoPaywalled. How do I read the whole story?
- camus2 9y agoHere is an archive of the article: http://archive.is/BE0Zm http://archive.is/BE0Zm
- Wh1zz 9y agocopy URL, paste in facebook search bar, enter, and pick any link that's been shared.
- Tepix 9y agoGo to the page, then click this bookmarklet javascript:window.location="https://m.facebook.com/l.php?u="+encodeURIComponent(window.location.href); https://m.facebook.com/l.php?u="+encodeURIComponent(window.l...
- mikehines 9y agoBitcoin is the new diamond, perhaps even more unethical and irrational.
- ccozan 9y agowhile I could agree that bitcoins are forever, I can't imagine putting one on a ring ... except maybe a NFC Ring[0]. [0] http://nfcring.com/ http://nfcring.com/
- headmelted 9y agoFair. People forget about the drugs, guns and human-trafficking that built Bitcoin. It may have started as a response to the corruption in the banking system, but that's not how it got to where it is now.
- mrwong 9y agothe US dollar finances the biggest war machine on this planet how the f is that ethical? Last time I checked 99% of street drugs are sold for USD. Please dont start withe propaganda “muuhh freedom” People can keep using USD or monopoly money as much as they want. But please be quite to tell people what is good or bad for them. USD lost 80% of value in the last 30years. And it will happen again. So where is the bubble?
- celticninja 9y agoGuns and human trafficking have never really been bitcoins main use case. Now drugs, drugs definitely are.
- Nursie 9y agoHonestly at this point nobody can really make predictions for the short or medium term. There's not much in the way of underlying use of BTC as anything but a gamble here, and the tech enthusiasts/crypto-libertarians have been massively outnumbered by the bandwagoneers and FOMO. The Bitcoin bubble could explode tomorrow or next year or just possibly it could find a way to become self sustaining (seems unlikely). It could repeat the crash-peak-crash pattern. It could do anything and analysis seems essentially pointless.
- d--b 9y agoPeople writing those article should know better, it's the wall street journal for god's sake. Buying a call option doesn't mean you're bullish that the future is going to trade up to that point. It could be a hedge for a short position or a way to go gamma-long or a way to make a structure cost-less, or really some other trading idea. The point is that if the price goes up, the call option price goes up faster, and then the trader can sell it before it reaches 50k. Liquidity though may be an issue. EDIT: what matters is that it is _possible_ that bitcoin goes to 50k next year. And since it is possible, people need to take that possibility into account in their strategies. It's like S&P option strike range for dec18, it goes from 1700 to 3100. Is it likely that SP price goes down to 1700 in the next year? no, but it's certainly possible.
- deleted 9y ago[deleted]
- frouge 9y agoClick bait!
- deleted 9y ago[deleted]
- jacksproit 9y agoWSJ is owned by Rupert Murdoch now. https://en.m.wikipedia.org/wiki/The_Wall_Street_Journal https://en.m.wikipedia.org/wiki/The_Wall_Street_Journal
- hxta98596 9y agoA call option also means someones else took the other side of this trade. Who sold $1 million dollars worth of December 2018 Bitcoin $50K call options? Also there's a back of the envelope implied volatility for Bitcoin here: on a $3k call option premium 12 months out (so breakeven on this "bet" is actually $53,000) Bitcoin implied volatility of around 120%? Not that equity option pricing model theories apply to Bitcoin, or even work as expected on equities for that matter, but it's interesting to see an implied volatility number regardless. Looks like Delta less than 10. With Futures already 3 months out at $17,000 it would seem like whoever sold this call option for $1 million could hedge (not perfectly hedge) the trade for less than $1 million. Oddly enough, both the buyer and the seller could end up profiting on this option trade. I agree this article is very bad, it feels like a paid PR article advertising for the trading company not actual news.
- jjoe 9y agoI'm curious about how people's arguing about Bitcoin's prospects correlates with their cryptocurrency holdings.
- Nursie 9y agoI'm highly sceptical about the entire cryptocurrency space, due to the weirdly gold-standard like underpinnings of most of the currencies. I don't like the idea of deflationary currency. I don't like the idea of decentralised currency; I think central banks play a useful role, even if they don't always do it well. I don't think BTC is a good payment mechanism because it requires exchange at each end, long confirmation times and burning a ton of energy. I don't consider putting money into cryptocurrency 'investment' because it's not like putting money into a company or venture - you're just buying a virtual asset to sit on it. I think a lot of the programmable stuff around ethereum is an overhyped solution looking for a problem, most/all ICOs are scams and a whole host of other negative things about the entire sector. That all said, I got curious and started mining with my gaming machines, and apparently I now have around $1K in various cryptocurrencies (half an ether, half a ZEC, some SIA, some ETN, a tiny piece of a monero, a few other little bits and pieces). The only money I've put in is through the electricity bill. I may find a way to cash out eventually, but at the moment I'm just going to hang on to it all and see where it is a year down the line. I don't believe in any of it - but I know other people do so there might be an opportunity to make some money.
- ansible 9y agoI've had a lot of those same objections since I first heard about Bitcoin. Ironically, I've been looking to buy some Bitcoin in the last couple months to trade for Sia, because I was thinking about setting up a storage node that can earn enough to pay for my own cloud backup needs.
- Nursie 9y agoI mined sia and eth together because there was a dual mining program. The idea behind it is kinda nice, I'm not sure I actually need the service right now... but I'll hang on to the 1k SIA I mined in case that changes. I'm not expecting a speculative leap in value as amounts of siacoin mined are huge compared to the likes of ether or btc... Do you need Sia to start hosting? I think you can just go for it.
- thisisit 9y agoThis looks like an uninformed ad for LedgerX. For god's sake, no one in their right mind trades naked options - neither the seller nor the buyer. Given the historical volaitity of bitcoin rising from 1000 to 16000, it shouldn't be surprising at all that someone wants to hedge (a concept which seems alien to the writers) their positions. The missing information is - what premium did it cost to secure the trade? Well, as per the data ~ $3600, which at current price is nearly 20% of the current price. Very costly premium for a very volatile product.
- plc 9y agouh -- who does naked options at ledgerx? and yes, the data says 3600 for the call, which is the definition of a premium. nothing missing, guys. seriously. do more thinking before you post. seriously no joke, I am the CEO there, former trader at Goldman so I sort of know what I am talking about with this type of stuff. You guys do not. It's hilarious to watch this conversation.
- hxta98596 9y agoYou're the CEO of this company? Well congrats on the WSJ article. Can I ask who books writing a large trade like this? Basically are you making this market and $1 million dollar trade like this would need to contact you guys to write it OTC? Or is the crypto options market supply that big and liquid already that a buyer can just come along and buy $1 million worth of Dec 18 Bitcoin call options that will clear?
- plc 9y agonot OTC -- it's centrally cleared by us.
- sctb 9y agoIt's not in your interest to be dismissive and insulting with others here, and it breaks the guidelines by being uncivil and unsubstantive. Could you please stop? https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- plc 9y agoYep -- CEO of ledgerx here, all these comments are all incredibly wrong.
- wepple 9y agoIf that’s true, you’re making your case worse rather than better. Your earlier comment that you worked at GS and “sort of know what I’m talking about” with no actual constructive rebuttal to any arguments undermines your credibility.
- plc 9y agothe comments were just straight up wrong assuming information that only I have, and I can't rebut it because, you know regulators would put me in jail. so now what?
- sctb 9y agoThe answer to "now what?" on Hacker News is always the same: comment according to the guidelines or just don't. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- FabHK 9y agoIn my experience at HN, people (even recognised experts) typically try to back their opinion and explain the facts, rather than resort to "all these comments are all incredibly wrong." Please try that, you'll have a much better reception.
- plc 9y agolook, i really do not try to be an ass about this stuff, but the stuff people post is actually just wrong and hurts my business (people on hn can appreciate this) but i can't say anything substantive because we're regulated by the US govt and I can't say anything beyond what I am allowed to. Does that make sense?
- DavideNL 9y agoa bet... placed by a Bitcoin millionaire, to make the crypto-currency frenzies buy some more Bitcoin?
- Nokinside 9y agoIs it possible to rationally manipulate and speculate using bitcoin or do you have to be a believer? Two year Bitcoin volume when measured in BTC seems relatively stable while the price goes up and up and new speculators come in. As long as the price goes up the same pace as demand, there is no upper limit to the price level that steady supply of bitcoin can support. At the same time the market gets thinner and thinner relative to the bitcoin wealth. At some point the social mania around bitcoin peaks and speculators want to liquidate more than there is buyers.
- rbx 9y agoCan bitcoin be "damaged" by quantum computers?
- wepple 9y agoAs far as I’m aware, hash algos like SHA or Scrypt are not the type of math that quantum computing threatens.
- DennisP 9y agoBut elliptic signature algorithm are, and that's what lets you steal coins.
- tromp 9y agoYes, a quantum computer with a few hundred error-corrected qubits (many more before error correction) would clean out all addresses with exposed public keys, by solving Elliptic Curve Discrete Log to recover the private key. This includes many old addresses that didn't hash the public key, any re-used addresses, and, using replace by fee, even all new addresses in the time frame between broadcasting a spend transaction and that transaction being included in a block (which can currently take many hours).
- bascule 9y agoIt's actually closer to 2330 qubits and 126 billion Toffoli gates: https://eprint.iacr.org/2017/598 https://eprint.iacr.org/2017/598
- wakkaflokka 9y agoThis is an interesting question to me, because I know little to nothing about the cryptography involved with cryptocurrencies. 1) What's the probability of the cryptographic ciphers behind cryptocurrencies being broken? 2) If they were broken, is it possible to 'move' BTC or other coins to a new cipher? I apologize if I'm using the 'cipher' terminology incorrectly.
- laurencei 9y agoSo if you "thought" that Bitcoin will go over $50k - why not buy the Bitcoin itself now at $20k (or whatever it is today)? i.e. what is gained with the call option here?
- cardmagic 9y agoLeverage
- lucozade 9y agoYou're assuming that it's naked (in the technical sense) speculation. If they're covering a short position then this is just akin to insurance to limit the downside. Entirely sensible and the reason why they were invented in the first place.
- laurencei 9y agoAny chance of a ELI5 of this?
- dagw 9y agoLet's say I'm convinced bitcoins will be worth at most $1k next year. Let's also say you have a bunch of bitcoins you're planning on sitting on for at least a year (since you're convinced the price is only going up and up). What you then can do is lend me your bitcoins for a year and charge me interest on that loan as a way to generate some cashflow on an asset you where just going to sit on anyway. So I'll borrow a bitcoin from you, sell it for $20k, and use some of that cash to pay you your interest. Now 1 year later I have to give you your bitcoin back. If I'm right, I can now buy a bitcoin for $1k on the market, give you the coins and pocket the difference as profits. On the other hand if bitcoins have gone up to $100k I'm screwed since I need a bitcoin to pay back my loan, and will have a loss of $100k-$20k = $80k. An option lets me lock in the price I have to pay for a bitcoin in the future. I know that no matter what happens to the price I need to buy a bitcoin one year from now. So by taking out a call I'm buying insurance that no matter what happens I will never have to pay more than $50k for that bitcoin and thus I've capped the maximum amount of money I can lose on the deal to $50k-$20k=$30k. Without that my losses are potentially infinite.
- tobiaswk 9y agoBitcoin is currently not what Bitcoin was when it was created. Slow peer-to-peer transactions High processing fees Average fees are approaching 40 dollars. That's an average. Unconfirmed transactions are at an ATH of 260k... has been at over 100k for weeks. The mempool is also at an ATH. The Bitcoin is crippled and nothing more than a "store of value". Sentences like "store of value" are now the term used to describe Bitcoin. Very far from what the Bitcoin used to be. I think there is a real possibility of a "death spiral of the blockchain". Fees will increase and it will become impossible to move coins on the blockchain besides the upper 10% of bitcoin holders. The fork that occurred on 1st August created Bitcoin Cash. This fork is much closer to what the Bitcoin was. Bitcoin Cash is this today. Removal of the segwit code (which hasn't solved anything), disabling of RBF (replace-by-fees) enabling 0-confirmation transactions again. A new DAA (difficulty adjustment algorithm). Finally increase the block size to 8MiB. The Bitcoin has been crippled on purpose by Blockstream deep in the pockets of bankers and insurance companies. Blockstream is the main contributor to the Bitcoin development. Look at the sponsors; https://www.blockstream.com/about/#investors https://www.blockstream.com/about/#investors Before the bankers, and their followers, got indirectly involved in Bitcoin development there never was any discussion about limiting the block size to 1MiB; in fact the opposite was discussed. See; https://twitter.com/adam3us/status/636410827969421312?lang=en https://twitter.com/adam3us/status/636410827969421312?lang=e... https://bitcointalk.org/index.php?topic=1314.msg15143#msg15143 https://bitcointalk.org/index.php?topic=1314.msg15143#msg151... https://np.reddit.com/r/btc/comments/71h884/pieter_wuille_im_in_favor_of_increasing_the_block/ https://np.reddit.com/r/btc/comments/71h884/pieter_wuille_im... Now all of this has led to a complete divide and clusterfuck of the community. It is an very ugly and toxic environment and is sad to look at. On top of that we now have thousands of alternative coins and blockchains. Just my 2 cents ;) Happy Christmas and new year to all!
- liamzebedee 9y ago> Unconfirmed transactions are at an ATH of 260k... has been at over 100k for weeks. Statistics like these should be more prominent in the argumentation. Regardless of any technical discussion of the merits of SegWit vs. big blocks, there isn't any doubt in the usability of the system as is compared to as before.
- candiodari 9y agoOkay ... options discussed on a tech forum. The next crash can't be far away ...
- koliber 9y agoSomebody bought these options. That person is betting that Bitcoin will go over $50k next year. Somebody also sold these options. That person is betting that Bitcoin will NOT go over $50k next year.