Quote from: DrGregMulhauser on June 30, 2014, 01:12:23 PM

Quote from: Este Nuno on June 27, 2014, 05:11:37 PM

In another thread on here people were talking about hedging bitcoin with derivatives and it made me wonder what sort of effect they would have on bitcoin if we had a robust market for those types of financial instruments.

It's more than a year old now, but in an old article called Bitcoin Derivatives, Liquidity and Counterparty Risk, I suggested that a transparent and robust derivatives market would go a long way toward making BTC a viable currency for larger volume real business use.

Quote from: Este Nuno on June 28, 2014, 07:48:10 PM

Seems like it would be a net positive for bitcoin. I wonder why there is so much resistance to the idea of bitcoin options. Misinformation maybe?

I agree it would be a net positive.

Of course, there was, famously, a BTC vs. USD quasi-options market available for a very long time, but eventually MP backed out of that offering entirely (February, maybe?). Ironically enough, I had warned that MP's approach to market making was a ticking time bomb, and MP publicly ridiculed that warning -- thereby revealing his profound failure to grasp the details of effective hedging along the way. Lo and behold, just a couple of months later, one encounter with a single trader who did grasp the details of effective hedging sent MP scrambling for cover and finally convinced him to abandon the effort altogether.

There's a new options offering being put together by the BitShrub guys, but I haven't caught up with them in months and so can't comment on whether it's going anywhere. The last I knew, there was no mpbot-style market making, so without the involvement of market makers with deep pockets and a better grasp of the territory than MP, I think it will likely be a steep uphill struggle to generate any kind of volume.

What is your solution for effective hedge for option market making?