Quote from: Shindo1988 on May 06, 2015, 08:18:50 AM

Quote from: Mt. Gox on May 04, 2015, 05:50:15 PM

Quote from: manselr on May 04, 2015, 05:16:45 PM

Quote from: Mt. Gox on May 04, 2015, 04:29:20 PM

Not sure why so many people think OP actually bought 10,000 BTC. He clearly said in his original post that the option cost him $7.50 per BTC. 7.5*10,000 = $75,000.

I don't think it's a stupid move. Looking at the Bitcoin price charts, the trend has been going downwards ever since late 2013. Is it really that unrealistic to think that it won't continue declining for another couple of months?

Quote from: Q7 on May 02, 2015, 08:18:02 AM

I wonder what would happen if the coin price moves in the other direction. I'm sure you have all the plans put in place in case the result did not turn out as what you expected? By the way, just wondering where did you manage to secure that amount of funding? Kind of curious since that is not small amount by any means.

You're probably thinking of shorting, which is a different thing. An option is essentially a bet that Bitcoin will/won't be above/below a certain price on/by a certain date.

I don't get how this works. How can he acquire 10000 for 75$? Where is the business for the one offering the BTC for such price? I guess im missing the point here.

He didn't acquire 10,000 BTC. Here's a short explanation of put options:

Quote

If you are betting against bitcoins, what you want to do is buy a put option, which is a derivative contract that allows you to sell something at a set price. If the actual price of the thing falls below the set price, or strike price, you make money.

It cost $75,000 for OP to buy a put contract to sell 10,000 BTC at a strike price of $215 per bitcoin. The contract expires in three months and will expire worthless if the price of a bitcoin is above $215 at that point. But the value of the contract will go up before then as long as the value of a bitcoin drops.

If the price of BTC is $207.50 then OP could sell 10,000 BTC for $215 making 7.50*10,000 = $75,000. Since the contract cost $75,000, he would be neutral overall.

If the price of BTC is $200 then OP could sell 10,000 BTC for $215 making 15*10,000 = $150,000. Since the contract cost $75,000, he would have made a $75,000 profit, and so on. The lower the price of Bitcoin is, the more OP benefits.

Wait, I am confused.
So, this is like a guessing game?
He placed a bet, estimating that the price of Bitcoin will be under $215, and if it is he wins, if it's not he loses.
Is that right?

That's a very simple way of looking at it but yes, in essence you are correct.

He paid $75,000 for the right to sell 10,000 bitcoins at $215 per bitcoin in three months. For example, if the price is $200 in three months then he will be able to make 15*10,000 = $150,000. Take away the $75,000 he spent to make the contract and he ends up $75,000 in profit.

Obviously the more the price goes down, the more OP profits. If the price happens to be $207.50 then OP's situation remains neutral. If it happens to be any higher than that then OP would have lost money (up to a maximum of the $75,000 he spent initially).

EDIT: In my explanation you quoted, I probably should have used "for $215 per bitcoin" than "for $215". My mistake.