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The derivative contract that drove the success of Bitmex, called a Perpetual Future, was quite the innovation. It behaved like a futures contract that never exp
by hntrader 6y ago
The derivative contract that drove the success of Bitmex, called a Perpetual Future, was quite the innovation. It behaved like a futures contract that never expired. It then led to copycat products across their major competitors.
Is there any product like this in traditional financial markets?
Regarding the authorities' pursuit of Hayes, it does strike me as odd that they're not going after their major competitors (mostly China-based) who also don't have KYC and are therefore serving US customers through VPN too.
- cortesoft 6y agoAre the China based competitors owned by Americans? I figured they went after this one because it is owned by an American, and they therefore have the authority to go after him.
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- markdown 6y agoJulian Assange isn't American :)
- lazylizard 6y agoand somali pirates..probably somalian??
- deathlight 6y agoI think violently attacking people falls under a different category than moving money or information in ways that powerful people/institutions don't like.
- thaumasiotes 6y ago> It behaved like a futures contract that never expired. What does that mean? A futures contract says "on [date], we will exchange [X amount of goods] for [Y amount of money]". If there's no date, nothing ever happens.
- hntrader 6y agoMeaning it's delta one. That is, it moves in near perfect tandem to the spot price.
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- askmike 6y agoTo make sure it actually does move near perfect tandem there is a new interest element that will incentivize the market to have the perp trade close to underlying.
- smabie 6y agoTechnically, it's not d1 (just like how futures aren't actually d1). And seeing that annualized % basis in swaps is so high (sometimes as high as 600%), you really need a good rate model to trade these things. The retail crowd doesn't realize this and is significantly disadvantaged compared to sophisticated market makers with rate models. tl;dr ignoring swap rates is very dangerous
- hntrader 6y agoWould the costs associated with holding perps differ substantially from getting exposure (in the same trade direction) through traditional futures? In perps we compensate the market through funding, and in futures we do so through term structure (ie the futures price exceeding spot). Annualized rates can be that high during periods of excess demand for perps but on average they're much lower. Agreed that it's important to take them into account.
- smabie 6y agoYou usually find that perps and short term futures have higher rates than longer term futures. A very common strategy is to buy longer term futures and sell shorter term ones. If you're looking for cheap delta, longer term futures are almost always the way to go. They are a lot less liquid, though. retail has a strange fascination with swaps. I have two theories for why this is: 1) they are easier to manage (you don't need to roll them). 2) they look cheaper on am absolute basis than long term futures. But if you want long delta, go with long dated futures. If you want short delta, go with swaps. The extra juicy trades come from buying long dated futures on one exchange and selling high rate swaps on another. However, you need a lot of margin or a sophisticated system to manage the risk.
- justjonathan 6y agoSorry to be pedantic, but the perpetual is a swap not a future.
- hntrader 6y agoCorrect. I'm saying it behaves like a futures contract in the sense it is delta one. It serves the same purpose as a futures contract but achieves that through a different mechanism. EDIT: My apologies, you are right. I called it a "Perpetual Future" in my OP, which was a typo. It should've read "Perpetual Swap".
- qeternity 6y agoThis isn’t true. The Bitmex “perpetual swap” isn’t any different from what spread betting and CFD dealers have been doing for years. They are basically just very short term futures that automatically roll forward. The real genius was to invert the trading process. People often talk about Bitmex being a Bitcoin derivatives platform, but it isn’t. It’s a USD derivatives platform. When you trade on Bitmex you’re trading USD derivatives funded in Bitcoin. This is what in theory allowed them to sidestep all that pesky KYC.
- hntrader 6y agoIsn't it rather different to CFDs because of the interest mechanism that it uses to keep the price aligned with spot? Where else have we seen that before Bitmex? The inversion was another big innovation of the perp contract, yes.
- qeternity 6y agoNo, spread bettors have constant (daily) financing adjustments. We’ve seen this loads before, it isn’t novel.
- tim333 6y agoFrom my experience of trading on both it is rather different. With spread betting you are basically just making a bet with the exchange at a price they quote. With the bitmex product you are trading with other traders rather than with the exchange. They claim to have invented it: "A Perpetual Swap is an innovative product invented by BitMEX"
- smabie 6y agoyeah except retail for the life of them can't figure out how to price quantos and the exchange is dying. They had such a headstart and squandered it. ftx is now positioning itself as the leading exchange.
- jkhdigital 6y ago
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- nullc 6y agoIt's a CFD with a constant interest payment. I find it hard to believe that similar didn't exist in the wild days of bucketshop trading in the US. Without one or something substantially similar why would you ever exit a losing position? :)
- anonu 6y agoSome ETFs hold futures that are continuously rolled forward. This is sort of an answer to your question. Products like USO or some vix etns are examples