

Bitcoin Options Trading - feydr
http://polimedia.us/bitcoin/options.php

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motters
Bitcoin seems to be overwhelmingly the domain of currency speculators, who
aren't really doing anything useful. More effort should be put into promoting
it as a working currency to exchange actual goods and services of value.

~~~
Jach
Haven't you heard of the Silk Road? ;P

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SkyMarshal
I applaud people in the BTC community for developing more advanced financial
instruments, but implementing them like this is so 1994. There's no way this
is scalable. Every order is hand processed via email. Maybe I'm just spoiled,
but check out the order fulfillment instructions you get after clicking
through for a purchase:

 _In order to buy 1 PUT @26.5 contracts expiring month after next at
27.74233656 each please send exactly: 3.18764653BTC

at the address 1JPvucRfu3ZzEvfBUQTJwsxMrZjeTqD6zR

You must send an email to office-at-polimedia.us BEFORE sending bitcoins,
containing the amount quoted above and the bitcoin address you are seding
from. Optionally you can also include the address you want proceeds forwarded
to. If you do not do this it may not be possible to prove ownership later on!

READ CAREFULLY! to understand how this works :

\- The amount you actually owe has been __rounded up at the 5th decimal place.
The last three decimal places are used to signal the order_ _, as follows :
the sixth carries the option type and maturity (calls this month 1, next 2,
after next 3 then puts 4, 5 and 6) ; the seventh and eigth carry the strike.
[Is that a hack or is that a hack? I have a visceral distaste for loss of
precision, even where it may not be obviously needed.]

\- The amount itself encodes the quantity bought. You will be credited as many
whole contracts as can be purchased by your order at the time of processing.
____I will do my best to process imediately_ __ _, but due to the somewhat
imprecise timing of the bitcoin transactions (by block rather than by
timestamp) there may appear slight delays. [manual order processing?]

\- Once your transaction has been accepted and processed, you will receive
change, for the fraction of contract that could not be bought, as well as for
the sums added as explained above for clerical reasons. The sending of this
change is the confirmation of your purchase. In general a confirmation should
show up within the hour. However, since I am currently handchecking all
transactions to make sure things run smoothly, this may be delayed. Even in
case of delay, you can rest assured that your order will be processed only
with quotes valid for your block.

\- Options will not be quoted on the last day of their month (so no quotes
after the last minute of the last Thursday of each month for options expiring
that month). This means the last you can sell any options is late night
Thursday. Times are the same as bitcoincharts use, so make sure you account
for that.

\- All options positions not closed by the first minute of last Friday in
their last month will be automatically exercised, at the weighted average
price of the day as published by bitcoincharts. This means that options out of
the money will be discarded. Options in the money will have their value
converted to BTC at the conversion rate then current. The amount of BTC thus
obtained will be sent before the following Monday (so until the last minute of
Sunday) to the address that originally bought the contract. The reason to do
it this way is that I do not think the market is liquid enough for spot prices
to be fair, and since I'm using Friday average price I can't trade on Friday.

\- I reserve the right to refuse any transactions for any reason (including
excess risk load on the book, order too large to effectively hedge etc) or for
no reason whatsoever. All refused transactions will be refunded within 48
hours.

\- You are not required to use this page, if you'd rather hack the orders
directly by the recipe explained above that's fine. However be aware that
uninterpretable orders will be treated as donations. You will not get a
refund. VERY IMPORTANT : bitcoin before v0.3.21-beta rounds automatically to
0.01. DO NOT USE IT OR YOU WILL LOSE YOUR MONEY. Bitcoin v 0.3.24-beta
correctly sends all 8 decimals.

\- Please keep all orders over 0.1 BTC. If you send less than that it will be
simply treated as a donation. You will not get a refund. This only applies to
BTC you actually send to open new contracts - cases where you are ordering the
sale or beneficial exercise of contracts you already own are specifically
excluded. This arrangement is needed to protect from transaction spam and also
allow signalling of sale/exercise orders.

\- If for whatever reason there no longer exists a reliable way to calculate
average prices I will stop quoting. Options whose execution is impeded by this
event will be refunded at price originally paid. In principle something like
MtGox going offline again would be in this class. Hopefully that will not
happen again. If the bitcoincharts aggregator goes offline I will either pull
the averages from someone else or write a script to do the averaging.

\- This is a service for responsible adults. While it is offered and operated
by me, Mircea Popescu (otc, twitter), I specifically disclaim any liability
for anything whatsoever. Whatever determinations or inferences as to
credibility or counterparty risk you make or may make are entirely your
responsibility. This service is offered, as all software is offered, with no
guarantees whatsoever, not even of merchantability, fitness for a specific
purpose and so forth.

The system is designed to allow anonymous use of the exchange. As such, it is
impossible for me to take on any counterparty risk whatsoever. For that reason
it is also impossible for me to otc-rate anyone based on their transactions
with the exchange. The situation is not symetrical, however, seeing how anyone
dealing with the exchange is taking on my counterparty risk, and as such is in
a position to rate me. I appreciate it if you do. Special thanks go out to
random_cat and ezl, who have offered invaluable advice during the early stages
of this project._

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mcphilip
I haven't gotten into bitcoins, much less bitcoin options, but if I were
looking to use options on bitcoins I'd first need to see some numbers
regarding liquidity -- daily and average volume, open interest, etc.

~~~
corysama
Most of the volume is in MtGox. Currently $668K today, $12.25M last 30 days.

<http://bitcoincharts.com/markets/>

~~~
elemeno
You'd also have to have a liquid options market, and counterparties you can
trust to complete the trade when you exercise an option.

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waffenklang
Neat. Hopefully serious. I bought one put as a test.

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anonymous
Oh good, it's been a while since bitcoin made the front page.

~~~
rdl
Just wait for a YC S13 startup announcement for some kind of bitcoin wallet
developer tool or optimized way to spend bitcoins on mobile devices... :)

~~~
feydr
you'd be surprised at how close to reality that idea is

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smallegan
Is this legal? Seems a bit like unregulated gambling?

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matusz13
While it is legal (for the time being) it is highly unregulated. Money
laundering is the first thing I thought of when learned about the bitcoin,
which, ironically is one of the excuses the government used to crack down on
online gambling recently.

