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I thought there are exchanges which allow crypto options trading?

• pzs 9y ago
  Futures are certainly available. I haven't heard of options yet, but that may just be my ignorance.
  • jabujabu 9y ago
    Bitfinex, Bitmex
    • frgtpsswrdlame 9y ago
      I think the counterparty risk involved in buying a long-dated (and expensive) put from one of those exchanges overwhelms any possible profitability. If Bitcoin really did crash, who's going to pay up for it? Right now there's not a very good answer.
  • vasilipupkin 9y ago
    ledgerx
• cdjk 9y ago
  Not in the volumes Buffett is interested in. And they are quite sketchy compare to regulated US financial markets.
• JumpCrisscross 9y ago
  Why would you trust, in the event of a Bitcoin meltdown, which is the case where your put pays off, that those exchanges would be in a position to honor their contracts?
  • elhudy 9y ago
    I'm not sure what you mean. Unless I am completely ignorant of the way financial markets work, the exchange is exchanging between two parties, and skimming off the top. They do not care what the price of Bitcoin is, as long as there is trading volume. They do not lose money in the event of a meltdown. The people selling the put options do.
    • JumpCrisscross 9y ago
      > the exchange is exchanging between two parties, and skimming off the top Nobody wants to run a credit check every time they buy an option. That just turns the premium into a fancy loan. If you buy an option on an American options exchange, it is cleared by the OCC [1]. They are everyone's counterparty. There is a long chain of people who have to default for you not to get your money. (Basically, the financial system has to melt down in a nation-state ending way.) I have no idea how Bitcoin options are being handled, but suffice it to say, counterparty risk dominates any other component. [1] https://en.wikipedia.org/wiki/Options_Clearing_Corporation https://en.wikipedia.org/wiki/Options_Clearing_Corporation
      • elhudy 9y ago
        Thanks for the info, that makes a lot more sense. I suppose I was under the impression that bitcoin exchanges would be under the same regulations as regular exchanges, considering they are operated by the same large american companies (e.g. CME)
        • UweSchmidt 9y ago
          Whoops, that couldn't be further from the truth. A lot of what these exchanges do would be super illegal in the real world!
    • icelancer 9y ago
      Try this, then: Prior to the housing crash, multiple people figured out that CDOs were full of shit and bankers were committing massive fraud with mortgage bonds. Traders could purchase credit default swaps (CDSes) to capitalize on this risk and pay the premiums until the correction hit, at which point they'd cash in huge. But uh, here's the problem: The same bankers that were investing in mortgage fraud (all of them) were the ones that would sell you the CDSes and cash your premiums. If the housing market was truly built on fraud and corruption - and it was - and banks could collapse - and they did, requiring a bailout that the banks knew was coming - maybe the bank wouldn't be solvent enough to pay you on your bet that you so rightfully won. Your largest upside win is capped, and thus the entire trade could be easily net negative.