883800+ entries in 0.583s
mjrIII: though
the actual place i get a futures contract from is not relevant
mjrIII: and as far as i can see, no interest calculated on
the futures
mjrIII: jurov: it depends, confident enough
to
try a
test program
Chaang-Noi: btw how do i get
to
that gold section again?
Chaang-Noi: cuz right after i signed up it was like
this
jurov: prolly someone
turned you in as a known
troll
Chaang-Noi: you are doing
that
too much.
try again in 2 minutes.
Chaang-Noi: one was in btc area, not i
try ltc are and im doing
too much
Chaang-Noi: so anyone use reddit? im new, but i cant post more
than once in 10 mins, and im even gold level, wtf?
jurov: i did some rough estimates while
trying
to prop up MPBPT, and
this haas been a problem,
too
jurov: btw,
to get
the leverage for your futures, you need
to pay interest... and
that can eat considerable part of your profit
jurov: or it implies
that using volatility 120,
the model should stay break-even over a long
time?
jurov: mjrIII, with how much confidence you computed
that?
mjrIII: so if you wrote options while hedging you should be able
to offer more efficient pricing i would imagine
mjrIII: but intuitively, while
the bots options are fully backed,
they are not hedged
mjrIII: again,
these are just using standardized finance
tools, which i am not sure how well
they apply
mjrIII: which should correspond
to an option price of .11
mjrIII: jurov: i
think
that is your random walk
mjrIII: YTD i
think daily historical vol is 120
mjrIII: i'm gonna redo
the numbers for every day in
the last year
mjrIII: not sure if i wrote
that correctly
mjrIII: square root of
the avg(difference from avg return for n periods)^2
mjrIII: and i arrive at vol by doing
the following
mjrIII: which was
the highest vol for any month
mjrIII: yes, and for
the month where
the price
tripled,
that is where i calculated volatility of 50
gribble: Next difficulty estimate | 25275743.691 based on data since last change | 24539552.1447 based on data for last
three days
mjrIII: depending on what you
think of as extreme
jurov: ^ yes, someone called
that fat
tail events
mjrIII: i am basically
trying
to show returns for any given price between 40 and 130
mjrIII: well,
that is what i am
trying
to do, in a way
jurov: then use
that price range as breakeven points for options
jurov: i'd rather
try
to consider btcusd as random walk and determine in which range it's going
to stay with, 95% chance during
the 1 or 2 months
mjrIII: but if
that IS
the case...does my hypothesis make sense?
mjrIII: if
the numbers are wrong, of course it wouldn't make sense
mjrIII: there should be an arbitrage opportunity, i
think
that is self-evident, no?
mjrIII: but given
that vol is 50, and options are being priced at vol 300
jurov: not sure if you're
taking
this from
the right end
mjrIII: underlying premise and all
that
mjrIII: so, if
the actual greatest volatility we have seen so far is 50, let's assume
that is
true
mjrIII: there must be a scenario where
the premium is not 33% of
the underlying
mjrIII: but if i do
this as a
thought experiment
mjrIII: i haven't done
the math perfectly
mjrIII: but not like 10x
the price of
the european option
mjrIII: typically you pay more of a premium for
the increased optionality
mjrIII: yes...and
that does make it harder
to price
jurov: hmm, did you consider
they are american style?
mjrIII: which was much lower
than 50
mjrIII: then calculated
their standard deviations from
the average return
mjrIII: and
to calculate
that, i
took
the "returns" on btc on options expiration days for
the last 12 months
mjrIII: if you look at daily volatility, its around 11 i
think
mjrIII: meaning if i opened an options contract on
the beginning of
the month,
the change would never have been sharper
than volatility of 50 (that was
the highest number i could make
the spreadsheet give me)
mjrIII: by looking at historical data i can calculate
the daily, monthly, yearly, etc volatilty
jurov: oh yes, i somehow
thought vol=volume and went derp
mjrIII: at
the current prices,
that number is 300
mjrIII: you arrive at implied volatility, or what
that person writing/pricing
the option
thinks
the possible moves are
mjrIII: if you reverse engineer
the prices being offered, for
the underlying price and
the strike price
mjrIII: one of
the largest factors in an options price is
the volatility
jurov: on "implied vol of
those prices"
mjrIII: meaning
there should be signifigant profits in
the middle (which no one has
tried
to
take) if you can handle your risk
mjrIII: so, i really don't know, all i know is
that
the implied vol of
those prices is 6
times higher
than
the greatest vol i've observed in any given month
mjrIII: and its very complicated, depends on if you measure p&l in btc or USD (that is not as simple a decision as one might
think)
mjrIII: of course
there are risks
mjrIII: that is what i mean by arbitraging
the difference between
the future and
the option
mjrIII: but
the combined premium of
that number of puts should more
than offset any losses from
the future contract if i can charge .15 btc per put
mjrIII: so i should be able
to sell some number of puts (can't figure out how many without actually
trying)
mjrIII: remember
that i only put up one bitcoin for
the future contract,
though
that allows me
to hedge 10 bitcoins prices
mjrIII: if prices rise, i still collect premium, and futures gives me less btc,
though same USD
mjrIII: but as
the future profits on price falling, it should offset
the loss from
the put
mjrIII: so now, due
to
the put, i lose money when price falls
mjrIII: since with
the future, i profit when price falls, i should be able
to
take risk in
that direction
mjrIII: so
that would be
the future side
mjrIII: BUT if
the price rises, i still have $680 dollars
mjrIII: which means
that my profit occurs if
the price falls, i can sell at
the higher price of my contract
mjrIII: so, i am effectively guaranteed
to receive $68 per bitcoin at months end, up
to 10 bitcoins
mjrIII: anyway, if i can for example, sell 10 btc at $68 at months end, and only have
to put up 1 btc as collateral
mjrIII: but let's say i am more comfortable with
the cp risk
than i am with
the fx risk
mjrIII: although let's pretend
there is
jurov: is
there a market with matching liquidity/expiration
time?
mjrIII: so i can build in profits in either direction
to offset losses by
the options
jurov: well, i did not understand how... you want
to hedge by selling futures?
mjrIII: mircea_popescu: does
that not make sense?
mjrIII: as i've said...the goal was not
to speculate,
the goal was
to arbitrage
mjrIII: so, if i can "employ my btc" by writing options and collecting premium, while doing it in a fully backed way (not exposed
to
the risk at
the expense of some profits),
then
that seems like a great way
to acquire more btc
mjrIII: and my goal is
to acquire bitcoin
mjrIII: the implied vol by
these prices is 300
mjrIII: but my point is
that when march and april happened,
the vol was 50
mircea_popescu: how much premium
today would you want
to give away your btc capital
tomorrow ?
mircea_popescu: start
thinking not from "o i could make some btc" perspective but fgrom
the "how could i employ my btc" perspective.
mircea_popescu: the problem is exactly
that. you can end up with 500k btc in liabilities.
then what ?
jurov: mjrIII, do you
think
this year's march and april won't happen anymore?
mircea_popescu: <mjrIII> while bitcoin is volatile, it isn't
that volatile << so you
think.
CheckDavid: I just can't interpret
the syntax used by assbot
ThickAsThieves: stressing over btc/usd was much less enjoyable
than
trading assets
mjrIII: i just
think
that most people would be
too scared
to writeoptions
ThickAsThieves: mostly i've been
too busy with other areas
to fuss over options lately