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Uh Oh... http://trilema.com/2014/mpoe-february-2014-statement/
Looks like the S.MPOE price is about to TANK. Without the options bot, the average monthly revenue will probably go down about 90%!
Quote
As a result, the MPOE bot will no longer quote options.
Looks like the S.MPOE price is about to TANK. Without the options bot, the average monthly revenue will probably go down about 90%!
The numbers are in. Monster month for MPEx.
Operational results, MPOE
Overall trade 26`208 contracts, of which -1`554 +0 Call, -4 +24`650 Put.
Revenue : 19`769.10256165 BTC, of which :
contracts sold : 34.20256165 BTC
contracts exercised : 19`734.90000000 BTC
Expenditure : 11`800.61618062 BTC, of which :
contracts bought : 10`594.58980562 BTC
contracts exercised : 0.0 BTC
capital expenses : 1`205.526375 BTC (10`715.79 × 11.25%)
exceptional settlement : 0.50000000 BTCi
Profit : 7`968.98638098 BTC
Operational results, MPEx
Revenue : 139.62178334 BTC, of which :
Revenue from sales fee : 69.62178334 BTC (Total trade : 34`810.89167308 BTC)
Revenue from new accounts : 70 BTC
Expenditure : 8.262335 BTC, of which :
PR, 2.875 BTC.
Advertising, 0.1 BTCii
Tech, 5.287335 BTCiii
Profit : 131.35944834 BTC
Shareholders table
Total shares : 1`000`000`000, of which :
Mircea Popescu, 838`159`714 shares,
Third parties 161`840`286 shares.
Total dividend : 8`100.34582932 BTC.
Operational results, MPOE
Overall trade 26`208 contracts, of which -1`554 +0 Call, -4 +24`650 Put.
Revenue : 19`769.10256165 BTC, of which :
contracts sold : 34.20256165 BTC
contracts exercised : 19`734.90000000 BTC
Expenditure : 11`800.61618062 BTC, of which :
contracts bought : 10`594.58980562 BTC
contracts exercised : 0.0 BTC
capital expenses : 1`205.526375 BTC (10`715.79 × 11.25%)
exceptional settlement : 0.50000000 BTCi
Profit : 7`968.98638098 BTC
Operational results, MPEx
Revenue : 139.62178334 BTC, of which :
Revenue from sales fee : 69.62178334 BTC (Total trade : 34`810.89167308 BTC)
Revenue from new accounts : 70 BTC
Expenditure : 8.262335 BTC, of which :
PR, 2.875 BTC.
Advertising, 0.1 BTCii
Tech, 5.287335 BTCiii
Profit : 131.35944834 BTC
Shareholders table
Total shares : 1`000`000`000, of which :
Mircea Popescu, 838`159`714 shares,
Third parties 161`840`286 shares.
Total dividend : 8`100.34582932 BTC.
The numbers are in. Monster month for MPEx.
Operational results, MPOE
Overall trade 26`208 contracts, of which -1`554 +0 Call, -4 +24`650 Put.
Revenue : 19`769.10256165 BTC, of which :
contracts sold : 34.20256165 BTC
contracts exercised : 19`734.90000000 BTC
Expenditure : 11`800.61618062 BTC, of which :
contracts bought : 10`594.58980562 BTC
contracts exercised : 0.0 BTC
capital expenses : 1`205.526375 BTC (10`715.79 × 11.25%)
exceptional settlement : 0.50000000 BTCi
Profit : 7`968.98638098 BTC
Operational results, MPEx
Revenue : 139.62178334 BTC, of which :
Revenue from sales fee : 69.62178334 BTC (Total trade : 34`810.89167308 BTC)
Revenue from new accounts : 70 BTC
Expenditure : 8.262335 BTC, of which :
PR, 2.875 BTC.
Advertising, 0.1 BTCii
Tech, 5.287335 BTCiii
Profit : 131.35944834 BTC
Shareholders table
Total shares : 1`000`000`000, of which :
Mircea Popescu, 838`159`714 shares,
Third parties 161`840`286 shares.
Total dividend : 8`100.34582932 BTC.
Operational results, MPOE
Overall trade 26`208 contracts, of which -1`554 +0 Call, -4 +24`650 Put.
Revenue : 19`769.10256165 BTC, of which :
contracts sold : 34.20256165 BTC
contracts exercised : 19`734.90000000 BTC
Expenditure : 11`800.61618062 BTC, of which :
contracts bought : 10`594.58980562 BTC
contracts exercised : 0.0 BTC
capital expenses : 1`205.526375 BTC (10`715.79 × 11.25%)
exceptional settlement : 0.50000000 BTCi
Profit : 7`968.98638098 BTC
Operational results, MPEx
Revenue : 139.62178334 BTC, of which :
Revenue from sales fee : 69.62178334 BTC (Total trade : 34`810.89167308 BTC)
Revenue from new accounts : 70 BTC
Expenditure : 8.262335 BTC, of which :
PR, 2.875 BTC.
Advertising, 0.1 BTCii
Tech, 5.287335 BTCiii
Profit : 131.35944834 BTC
Shareholders table
Total shares : 1`000`000`000, of which :
Mircea Popescu, 838`159`714 shares,
Third parties 161`840`286 shares.
Total dividend : 8`100.34582932 BTC.
In light of recent developments at Mt. Gox, this thread is worth a revisit. How many more coins were lost this way?
Maybe this helps.
It seems MtGox made a mistake somewhere.
It seems MtGox made a mistake somewhere.
Quote
that's a problem, but not the worst problem we ever faced
all the broken withdraws have been re-issued
just spent one week of BTC-only income
MagicalTux is a dev of MtGox.all the broken withdraws have been re-issued
just spent one week of BTC-only income
as bad as it is for the option writer right now, at least gox being dead will not count against the weighted price at settlement.
Presumably. I haven't heard an official verdict on how they will be settled. Looks like he is only down 8-9000BTC at the moment, I guess it could be worse :-P
Would be so epic if he came out with a positive ROI on this trade. The stuff of legends.
It might actually happen too... Or it might be refunded at purchase price.
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See :
What is the reference BTC/USD ratio you use for options exercises ?
The 24 hour volume-weighted cross-exchange ratio is used, as published by bitcoincharts. The same figure is available in any IRC channel where gribble is present. The command is ;;bc,24hprc
26. What if that becomes unavailable ?
If the service is temporarily unavailable the MPOE market maker bot for options on MPEx will stop quoting. Exercises will occur at the last available price. This has happened a few times in the past, but the interruption never exceeded a couple of hours.
Should the service be unavailable for a longer interval I will devise some other way to obtain the data and calculate the average. In principle I would prefer for a third party to be doing this, but absent such it will be done by MPEx itself.
If for whatever reason there no longer exists a reliable way to calculate average prices (such as for instance MtGox being suddenly and permanently closed or other such catastrophic event) options will be refunded at prices originally paid.
What is the reference BTC/USD ratio you use for options exercises ?
The 24 hour volume-weighted cross-exchange ratio is used, as published by bitcoincharts. The same figure is available in any IRC channel where gribble is present. The command is ;;bc,24hprc
26. What if that becomes unavailable ?
If the service is temporarily unavailable the MPOE market maker bot for options on MPEx will stop quoting. Exercises will occur at the last available price. This has happened a few times in the past, but the interruption never exceeded a couple of hours.
Should the service be unavailable for a longer interval I will devise some other way to obtain the data and calculate the average. In principle I would prefer for a third party to be doing this, but absent such it will be done by MPEx itself.
If for whatever reason there no longer exists a reliable way to calculate average prices (such as for instance MtGox being suddenly and permanently closed or other such catastrophic event) options will be refunded at prices originally paid.
These two statements are in conflict with each other. Bitcoincharts is still quoting, but Mt Gox catastrophically closed.
as bad as it is for the option writer right now, at least gox being dead will not count against the weighted price at settlement.
Presumably. I haven't heard an official verdict on how they will be settled. Looks like he is only down 8-9000BTC at the moment, I guess it could be worse :-P
Why do you think, that they can not replace frozen and lost coins ?
As I said, If they sold the frozen BTC on another exchange they wouldn't have any left on Gox to replace the frozen and lost BTC.
The only other option I see is they buy BTC on Gox at a discount, sell them on another exchange, use the profit to buy more again on Gox and repeat until they have enough capital and BTC to reopen withdraws.
The most obvious option is they are selling frozen BTC on Bitstamp and then trying to withdraw it to a shell corporation they control in the Cook Islands. Why should they even try to replace customer funds. They never replaced the Bitcoinica funds.
With the gox crash I can't imagine this guy hasn't been stopped out by now. Looks like MP will (probably) have a big payday this month...
When the bot has stopped quoting, then exercise occurs at the last quoted price. So nominally he is still only down ~6500BTC. Who knows how MP will interpret the contracts if Mt.Gox goes under. But usually his interpretations are profitable for the site (and S.MPOE). Waiting till closer to OpEx to see how this plays out...
Well, the MPOE bot stopped quoting due to "exchange divergence"
BUT, that guy short the 24,000 contracts is dead.
($5000-$430)/$430 * 0.1BTC * 24,000 contracts - 10000 BTC proceeds from original sale = about a 15,500 BTC loss at the moment...
EPIC loss. Complete annihilation of a trading account which was worth >$10,000,000 a few weeks ago.
BUT, that guy short the 24,000 contracts is dead.
($5000-$430)/$430 * 0.1BTC * 24,000 contracts - 10000 BTC proceeds from original sale = about a 15,500 BTC loss at the moment...
EPIC loss. Complete annihilation of a trading account which was worth >$10,000,000 a few weeks ago.
Is it over? Doesn't he have until the end of the month?
Depends if he was stopped out. Since bot still is not quoting, I think he is OK.
Gox spiked to $540 from the low $300s last night, right before it's current dip into the mid $200s. What would explain this, other than Mark or someone at Gox who is in control taking a big payout? I'm not exactly sure what is happening, but every indicator says we are witnessing one huge act of corruption and thievery.
That was due to a troll post on reddit that said BTC withdrawals were working again. Someone had an itchy finger and jumped the gun without confirming. Post was deleted about 15 minutes later. Great way to lose money.
Well, the MPOE bot stopped quoting due to "exchange divergence"
BUT, that guy short the 24,000 contracts is dead.
($5000-$430)/$430 * 0.1BTC * 24,000 contracts - 10000 BTC proceeds from original sale = about a 15,500 BTC loss at the moment...
EPIC loss. Complete annihilation of a trading account which was worth >$10,000,000 a few weeks ago.
BUT, that guy short the 24,000 contracts is dead.
($5000-$430)/$430 * 0.1BTC * 24,000 contracts - 10000 BTC proceeds from original sale = about a 15,500 BTC loss at the moment...
EPIC loss. Complete annihilation of a trading account which was worth >$10,000,000 a few weeks ago.
Down 8,300 BTC.
This strategy is actually looking pretty juicy now... .82 per contract!
This strategy is actually looking pretty juicy now... .82 per contract!
I need to understand this stuff better... what do you mean the strategy is "looking pretty juicy"... isn't this a bad thing for the person who executed this strategy?
I mean, there is a lot of value to extract by implementing the strategy from this current price point. Though hugely risky too.
Last Friday of the month, Romania time.
When do the options expire?
Holy crap this makes my head hurt just trying to figure out how this whole thing works... So when someone buys put options they basically insure themselves against a price drop in the future. For instance if I had just bought 1000 BTC but wanted to insure myself against a price drop I could buy some put options with it that insure me that I can sell at a predetermined price at some point in the future or before it. So if the price crashes way below my put price I could choose to sell my BTC at the predetermined price. Now what happened here is that someone naked shorted those puts which makes it a little bit more complicated to wrap my head around. So basically someone borrowed puts that don't exist and sold those to that mpex bot, but he will have to buy those non-existing puts back at some point in the future. When the price goes down those puts will become more expensive, but if the price rises they will become cheaper. Did I get this right? As for the reason why someone would do that, I guess it's because there's not enough liquidity to do it through buying and selling actual BTC on the market.
Correct, except for the reason why he sold puts instead of buying calls is that the market-making bot charges a HUGE markup if you want to buy options from it. But you can always sell to the bot for at least the current nominal value, so you get a better value selling to bot than buying from bot. But then you have unlimited downside risk (in BTC terms).
What is the significance of varying strike prices between $4100-$5000?
From what I understand it limits the upside potential, so if the price at the end of the month is $5000 or $10,000 it makes no difference.
But why would someone choose varying options between $4100 and $5000? Does the premium vary with the strike price such that shorting a put option with a strike price of $2000 is cheaper than one with a strike price of $5000? If so, does it indicate the person expects the price to be between $4100-$5000 at the end of the month?
Finally, what collateral was required to naked short the put options? And was that amount in USD or BTC?
Thanks
I would be also really interested to get answers to these questions.
Answers :
Bot only quotes 1000 contracts at a time per strike, and occasionally sells out of a strike, so if you want to build a big position quickly, you can spread across multiple strikes.
The premium does vary across strikes, but this deep into the money there isn't much time premium. However, the intrinsic value of each contract does vary across strikes.
From the FAQ : "Each CALL requires 1 BTC of collateral irrespective of strike. Each PUT requires an amount of collateral equal to strike / spot BTC . "
Everything is done in BTC, no fiat.
Yes, if price goes over $5000 by end of month, all the put contracts will expire worthless, and the seller will have pocketed ~12,500BTC. So far it's not looking good for the seller though.
Yes, hedging declines in fiat valuation by buying puts fails if BTC price goes to 0. There is a wide band in which it theortically works though. That said, winning trades on puts purchases are extremely rare due to the purchase premium and bitcoin's tendency to explode upwards.
If you think the bot is mispricing the options, you might be right, but probably are missing something. Open a position if you think they are off! You can trade MPEX securities here http://coinbr.com/ref?c=t1vLT2E7SK without paying the 30BTC registration fee.
Outlook :
The short puts whale might have been stopped out of his position, nobody knows. The bot has stopped quoting for now, presumably to prevent increased exposure from asymmetric news releases in a high volatility period. I imagine it will start quoting again soon.
Holy crap this makes my head hurt just trying to figure out how this whole thing works... So when someone buys put options they basically insure themselves against a price drop in the future. For instance if I had just bought 1000 BTC but wanted to insure myself against a price drop I could buy some put options with it that insure me that I can sell at a predetermined price at some point in the future or before it. So if the price crashes way below my put price I could choose to sell my BTC at the predetermined price. Now what happened here is that someone naked shorted those puts which makes it a little bit more complicated to wrap my head around. So basically someone borrowed puts that don't exist and sold those to that mpex bot, but he will have to buy those non-existing puts back at some point in the future. When the price goes down those puts will become more expensive, but if the price rises they will become cheaper. Did I get this right? As for the reason why someone would do that, I guess it's because there's not enough liquidity to do it through buying and selling actual BTC on the market.
Correct, except for the reason why he sold puts instead of buying calls is that the market-making bot charges a HUGE markup if you want to buy options from it. But you can always sell to the bot for at least the current nominal value, so you get a better value selling to bot than buying from bot. But then you have unlimited downside risk (in BTC terms).
Re: I have never cashed out and looking at the actions of Apple and Paypal I'll hold
OK so can u plz tell us about this magical altcoin that has a stable price, doesn't crash and pays nice dividends?
Plz do tell otherwise our entire post is just ass talk.
Plz do tell otherwise our entire post is just ass talk.
There is Bitshares http://invictus.io/bitsharesx.php which has a fixed supply and will give a 5% dividend. There are also a bunch of alt coins and assets which pay dividends and also have fixed supply.
Just watch the securities thread https://bitcointalk.org/index.php?board=78.0 and you'll see all kinds of
FTFY
he's wishing it was at 700 at this point.
He is now down about 3800BTC.
OUCHIE!
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...