Quote from: gog1 on February 07, 2014, 04:05:41 AM

Quote from: Bugpowder on February 05, 2014, 08:38:35 PM

Quote from: John999 on February 04, 2014, 11:25:32 PM

Are those puts on the price?

That is someone selling puts to the MPEX bot. They are going short 25,000 PUT contracts that are deep in the money. Note, that the contract is for the price of 0.1BTC. So they are shorting puts with at strike price from $4100 - $5000 / BTC

About an $8,000,000 notional value on those contracts now. Looks like a pretty smart play actually. Current BTC price is $847. It is extremely expensive to purchase calls or puts on MPEx due to the huge volatility premium. But you can sell to the market maker for more reasonable mark up if you have additional backing capital deposited to cover the short risk.

Let's run the numbers :
If expiry happened today, simplifying calculations as if all contracts were P500Ts...
(5000-847)/847*.1BTC = .490 price, or break even.

But expiry in end of month, so by then,
If BTC drops to $700, (5000-700)/700*.1BTC = .614, or about a 25,000*(.49-.614) = 3100BTC loss
If BTC rises to $1000, (5000-1000)/1000*.1 = .4, or 25,000*(.49-.4) = 2250BTC gain

Love or hate MPEX, it is the only place in the world that has proven it can handle this sort of exposure. In fact, this is a pretty small position in BTC terms compared to what people were throwing around in march 2013. I believe they paid out 19,407 BTC that month to people that bought calls, of which 15,000BTC was personally covered by Mr. Popescu, which appears to have wiped out all of the profits he made from the first 2 years of operations of MPEx.

He's deep under the water right now.

Yah... Valuation is based on the 24VWAP of all USD exchanges (from bitcoincharts). The mtgox collapse hurts particularly bad then, as it figures into the level.

Current price $777.... he is down about 0.05BTC / contract, so 1250BTC or $1M. The sick part is that to cover, he needs to buy back from the bot, and the spread the bot provides is a full 0.5BTC. So he would need to spend 25,000BTC to close the position (for a 12,500BTC loss). I suppose he will probably just sit tight...