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Derivatives

Stocks Tick Downward and so Does Bitcoin, to $9,200Bitcoin is back at $9,200 Thursday as crypto derivatives helped push its price down and equities closed lower. Bitcoin (BTC) trading around $9,211 as of 20:00 UTC (4 p.m. ET), slipping 2.3% over the previous 24 hours. Bitcoin’s 24-hour range: $9,154-$9,469 BTC below 10-day and 50-day moving average, a bearish signal for market technicians. When stocks overall trend lower, it often leads to bitcoin prices dropping, said Karl Samsen of Global Digital Assets. He added that as public companies continue to release their dismal quarterly business results, equities will drop even more. “We’re seeing a W-effect in terms of the COVID-19 reopening” of the economy, he told CoinDesk. Thus, the stock markets aren’t performing well Thursday. As spot bitcoin headed lower Thursday, the cryptocurrency derivatives market saw its first excitement in a week as sell liquidations popped up on BitMEX. Traders who were long bitcoin saw over $20 million in BitMEX positions exited as price dropped on the spot exchanges such as Coinbase.
COINBASE:BTCUSD
by danielcawrey
2
The fascinating history of derivatives!I do not know how many people are interested in this. I know I am. I am not a historian, I am exposing here what I know, some of it might be inaccurate. For those that do not know a derivative is a financial product derived from an underlying asset or reliant on it. So in other words currencies, indices, bonds, interest rates, commodities, stocks. 65 million years ago or more: Primates 25 million years ago: First hominoids (apes). Bipedalism & loss of body hair speculated to happen 5-7 million years ago. 4 million years ago: First Australopithecus. Said to be as smart as modern chimps (I don't know if other apes 4 million years ago were smarter or not). 2.5 million years ago: Homo genus. Homo habilis. Not the first to use stone tools, but they are more advanced. Start of the paleolithic (old stone age). 2 to 0.5 million years ago: different human species. Not sure if sapiens descends from habilis or erectus or both. First known use of fire by Homo Erectus. 1.2 million years ago skin pigmentation appears, probably because of a megadrought. Sweating is older than this I think. I don't know much about the evolution of speech, stamina, opposable thumbs etc. I know the world temperature is in a downtrend for the past 50 million years. I don't really know all the ice ages and everything. Alot of very big very strong mammals with low intelligence disappeared. CO2 levels started being really very low. It is likely in my opinion that with the glacial periods, the droughts, the low CO2, apes had to get smarter, as well as start hunting meat (homo species have the digestive system of herbivores but consume meat) at some point using the help of dogs (not sure when that first started, but at least 15 thousand years ago). Human species might have started to save food for harsh times that I don't know. Eating meat (eating everything even bone marrow and potatoes perhaps) allowed humans to make evolutionary leaps because they spent less time looking for food and eating. Tribes might have traded with each other I don't know. 0.8-0.3 million years ago: Neanderthal, Denisovan 0.5 million years ago: H. Sapiens, a champion, is born. The species starts its path to absolute world domination and Super Apex predator, dominating all biomes, land, sky, upper ocean, the depths too, and even the bacteria living deep down in earth crust. 300,000 BC: Earliest evidence of long distance trade network. It is highly likely I think, that short distance trade networks precede that. From wikipedia: "The use of barter-like methods may date back to at least 100,000 years ago. There is no evidence, historical or contemporary, of a society in which barter is the main mode of exchange; instead, non-monetary societies operated largely along the principles of gift economy and debt. When barter did in fact occur, it was usually between either complete strangers or potential enemies." Yes, debt is pretty old. Everything that was invented was for a reason, because it made sense, and was necessary. Buying cheap to sell low might be very very old... Possible more than 100,000 BC: Brace yourselves... Some people think money evolved as a convenient way to replace barter (I have rice I want apples he has apples but wants something other than rice...) but this has not much evidence, and a theory that makes more sense is since it all started with IOUs which can be hard to keep track of (plus there's no proof) then money was first a debt and later became a medium of exchange and (lol) a store of value (I guess we devolved). 10,000 BC: With CO2 levels going up and the climate improving, agriculture appears (probably for the first time). 8000 BC: Oldest evidence of derivatives. Clay tokens used in Sumer (Iraq) as forwards or futures. Climate was not constant, yields would fluctuate. So it makes sense that they needed a way to hedge against fluctuations in supply. 5400 BC: Earliest "City", Eridu, in the Iraq region, not a city by our standards but they considered it so. ~3000 BC: Mathematics history begins in the region of Iraq/Egypt/Syria/Turkey. 3000 BC: The mesopotamian may be the first to develop a large-scale economy using commodity money. The shekel, a specific weight of barley. They had an advanced economic system with rules on debt, credit, contracts, private property, full blown capitalism... Urban Revolution: When rural villages turned into urban societies. It all began back then... Long distance (between different cities with different "kings") trade is regular. Obviously, writting was required. Iraq 3500 BC Egypt 3100 BC India/Pakistan 3000 BC China 2500 BC "The civilized life that emerged at Sumer was shaped by two conflicting factors: the unpredictability of the Tigris and Euphrates rivers, which at any time could unleash devastating floods that wiped out entire peoples, and the extreme fecundity of the river valleys, caused by centuries-old deposits of soil. Thus, while the river valleys of southern Mesopotamia attracted migrations of neighboring peoples and made possible, for the first time in history, the growing of surplus food, the volatility of the rivers necessitated a form of collective management to protect the marshy, low-lying land from flooding. As surplus production increased and as collective management became more advanced, a process of urbanization evolved and Sumerian civilization took root". 1750 BC: Code of Hammurabi , the first lawyer book. It set rules on contracts & on trading including "finance". We still have copies! Who knows how many traders profitted off spreads arbitrage speculation and more back then. First derivative exchanges (in Babylon temples), very likeky to have lasted 1000 years or more. 3000BC-300BC: Evidences of derivatives used in other areas than Iraq but no market/exchange that we know of. 500 BC: Thales said to have made a fortune with a put option on oil back then. He speculated on options over the counter, as there were no known exchange (Greece). 330 BC: Alexander army/followers notice derivatives and see their advantage, the concept makes its way to Greece & Rome. Which is why it is very likely Babylon exchanges lasted more than 1000 years (1750BC to 330BC at least). 300 BC - 500 AC: Evidence of derivative trades, but I don't know if there were markets, all was probably OTC. 476 AC - 1492 AC: The dark ages in Europe. The Arab world have their age of enlightement but I don't know about finance there. The rest of the world doesn't make any progress in that area as far as I know. CO2 levels dropped and times were tough. Hunger and scapegoating is common (middle aged and old women with no husband were seen as useless mouths to feed and often ended being called a witch then burned or drowned, the arab world developped polygamy to adapt to high male mortality so afaik they didn't burn their women). The church before the tough times of low CO2 used to say about people that accused someone of witchcraft that they were supersticious uncivilised pagans. The church sees derivatives & interests as "gambling" and "evil", so it becomes clandestine. Not a very interesting period prone to advancements, not much in science, not much in standard of living, maths, finance... Some exceptions: Late 1200s Monty Shares, 1300-1800 Loggia in the Piazza dei Banchi. 1 big exceptions: There was a gigantic futures operation. Ran by the Church. Give them money against a sacred contract for eternal life. It is a form of futures contract. 1530: Charles V of the Netherlands helps bring back a derivatives market. 1531: Antwerp Stock exchange (Hurray). 1571: Ancestor of the London Metal Exchange. 1637: Tulip Bubble 1730: Dojima Rice Exchange (and first known use of Technical Analysis) 1789: French revolution. Followed by terror, Napoleon etc. 1800: CO2 level pops off. Time to accelerate progress. ~1800: Industrial Revolution, emergence of labor (arguably "wageslaving"). Shortly followed by Karl Marx, and the 20th century will be the century of socialism & communism & fascism. In particular the terror communism following the russian revolution, similarly to France. First time in history where capitalism is questionned? Early 1800s: The UK bans regular slavery (wage labor or wageslavery means this is not required anymore...) At the time labor was compared to slavery, there was no argument against private property or capitalism thought. 1848: CME CBOT. Not sure when stocks only had their exchange and when commodity futures did. FX never did until recently but most of the trading is still OTC I think, with a lot of swap trading thought. 1945: Gold standard, following the great depression and WW2 result of high inequality and the Reichbank money printing. 1971: Gold standard abandonned, back to FIAT money printing and inequality uptrend. 1990s: Trading makes its way to the internet 2000: I am not sure but I think this is when "macro trading" (Oil, world economy, FX) got big. Retail trading from home develops. Everything got more and more correlated as a result. 2010s: As an answer to wild money printing, in particular after 2009 bank bailout, new improved crypto currencies are created, in particular Bitcoin. Still FIAT currencies, and not meant to be store of values if I remember Satoshi whitepaper correctly, but with a limited supply as well as no central control to prevent what happened in Zimbabwe & Germany. Exchanges (crypto ones) are completely online and anyone can be a market maker, money transactions are (well depends on the crypto) quick simple fast. Crypto exchanges are open 24/7!
Editors' picks
BITSTAMP:BTCUSDEducation
by MrRenev
17
SILVER IS THE OPPORTUNITY OF THE CENTURY! PATIENCE REQUIRED!A BREAK BELOW 8.795$ WOULD SHAKE OUT MOST WEAK HANDS! IT WOULD BE A HEALTHY MARKET CULLING OF IMPATIENT PARTICIPANTS! A HIGHER LOW WOULD SIGNAL A CONTINUATION OF THE BULL MARKET IN THE MEDIUM-TERM! VOLATILITY WILL BE EXTREMELY UNATTRACTIVE TO THIS SPOILED/ATTENTION SPAN-LESS GENERATION! REMEMBER THIS IS SIMPLY THE DERIVATIVE PRICE, THERE ARE 300 FUTURES CONTRACT OUNCES FOR EVERY SINGLE OUNCE OF PHYSICAL INVESTABLE PURE SILVER! THE PHYSICAL PRICE IS RAPIDLY DECOUPLING AS I HAVE PREDICTED FOR A VERY LONG TIME!
SLong
by UnknownUnicorn4195243
BEARS CRUCIFIED BY DERIVATIVES. While the bear's corpses are still warm, here are my thoughts on the Tesla beautiful madness that we’ve all been witnesses to on the 3d and 4th of February. I guess that literally, EVERYONE was there, trying to get their piece of the action in Tesla. Some late to the party retail investors, all the day and swing trading crowd, with their pitchforks and torches out, ready to slay and bury all the bears still left, and then the poor bears themselves, who came in two shapes.Regular short-sellers and option sellers. I think that the reason for which the last day's surge was almost vertical and the insane highs that the stock got to, was in the stubborn short sellers finally being forced to close their positions on the market where no one is selling in the sufficient volumes, and, most importantly, deep out of the money call option sellers, caught between the rock and hard place, also forced to cover. A classical case of an elephant on the thin ice. Given that Tesla was thought by many, to be on the brink of bankruptcy, with the words bubble and even fraud frequently associated with it, no wonder crowds were drawn into selling deep OTM calls for pennies on the dollar, thinking it was a safe way to make a 1000 dollars doing nothing. And even just a few days ago, before the Q4 report, many thought that this was a peak, and selling options at the strikes that were 20-30-40% away was a great idea. When the going begun to get tough on the first day of the slaughter, many of them, who were OTM deep enough decided to wait for the time decay to solve the problem. Or hoped that the price simply never got there. Others were forced to cover, with their bids pushing the price up, triggering new strike levels. The next day, however, some of the "too far away to care" folk woke up eyeing their expected easy 1000 dollar profit turn into 5-10 thousand dollar losses. These people needed to buy the stock, or buy the options back. And No one was really selling. I only wish I could have seen the Level2 action those days…. The higher the stock went, fueled by the competing option sellers, desperate for the cover, and speculative small traders that came to feast on their pain, the further away strike levels were being triggered. And so on. More new levels triggered led more people into buying at ANY PRICE. If you calculated the combined open interest on all of the strikes for all the expirations a week ago, that would have given you a MASSIVE powder barrel, ready to blow up, with the Q4 report being the lit match thrown into it. A self-fueling machine with no breaks. The surge stopped only when someone started selling consciously, feeling that the price was right. And while I gave you an example of a small trader Joe with a 10k dollar losses, I am sure there were hundreds of hedge funds that were in the same situation and got burned badly. So we’ve got a tale of a cult-like company, with the armies of both fans and haters, and the arrogance and madness of the crowed amplified by the destructive power of the financial derivatives. Love it. Beautiful. Precisely the kind of stuff that we like here on the market. On a side note, if you are an intraday trader take a look at the last 3 trading day's charts. Good setups. Good timing. That is, however, provided that you had enough buying power. Yet, look at the charts for educational purposes anyway. Turn on a 3 minute chart to get a proper view. Dont like the early morning trades but the first arrow there was still good. Should have judged by the Level2. Like, subscribe, comment and share for more ideas.
NASDAQ:TSLALong
by CassidyWaterhouS
8
Bitcoin Update | Important HintA few more things which I found on the chart, while comparing to the bottom of 3100-4200. Right now looks like we got similar structure with key level of resistance at 7800-7600. So keep your eye on the breakout from it. Similar to 2018-2019 bottom we have a concentration of Bearish Candlesticks at circle area. I will keep adding to long position in next liquidity zones: Liquidity zones on the levels 7400-7300 7100-7000 6800-6700 Keep you position size, leverage and liquidation levels in safe areas. It is a high volatility zone! Overall market sentiments should go highly bearish in this range, so be sure your emotions are under control. Stay safe and profitable. Questions — @arshevelev
BITMEX:BTCUSD.P
by ArShevelev
DEUTSCHE BOMB - Sorry I meant 'BANK'Some may not have heard of Deutsche Bank. Some may not know what 'systematic risk' is. Well, whether you heard of any of this before listen up. DB has been in serious trouble for years and in recent weeks there is more trouble. As the rules do not allow me to reference what I say here, people will need to Google some of this. Deutsche Bank has been over leveraged to the tune of Trillions. Then recently there has leveraging of the leveraging, to put that in a nutshell. Read up on level 3 assets in relation to Deutsche Bank. Germany's domestic economy relies heavily on Deutsche Bank. DB is totally wired into major banks globally. Share holder confidence in DB has been galloping south in recent weeks. Would you buy shares in DB? Some say when there's blood on the streets that's the best time to jump in. Sorry - some can go right ahead. I like my money in my pocket. Looking into the derivatives fiasco looming on DB the whole world is at risk! If DB falls watch out for shockwaves globally. Disclaimer: This educational post is not intended for trading or investing decision-making. No liabilities accepted.
NYSE:DBEducation
by Captain_Walker
1
When the CBOE no longer wants to short BitcoinThere is an impressive correlation between Bitcoin's price and the futures markets created on it by the two well-known financial juggernauts: the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE). As I already mentioned on one of my first publications of 2018, the start of the futures contracts (CBOE on 12-10-2017 and CME on 12-17-2017) coincides perfectly with the bubble top, of which the ATH (All Time High) close $ 20,000 was also on 17-12-2017. These derivative products allow to bet upwards but also and especially down on the value of the asset concerned, here Bitcoin. The bet is contractualized at a price and a date fixed in advance with very important leverage effects. It is basically the giant casino of global finance. And the Bears (financial institutions, banks) then have a privileged tool to express their skepticism about Bitcoin! However, the economic incentive to manipulate the market of the underlying is all the stronger in the presence of a bet taken on the derivative market! As of March 2018 circulating on the social networks the alleged actions of some fund managers, accused of having provoked the decline of the Bitcoin price to be able to generate profits, which could have prompted many savers to withdraw from crypto-markets . But what is interesting to note today is that the Chicago Stock Exchange, the CBOE, announced in March 2019 to end its Bitcoin futures! The last listed contracts scheduled to end in June 2019. In my view, this is an additional indicator of a lesser influence of the most powerful Bears (big boys in finance, institutions, banks) on the crypto-market, giving the latter the possibility of 2019 to come out of his bear market. What seems to want to prove to us, a few days after this announcement, the pump to $ 5200 ... like a boost of confidence Bulls!
BITFINEX:BTCUSDLong
by MaxHodler
15
Seeking EdgeHow can you make money in this environment? When you step back and look at trading on a quarterly basis, how has one faired in 1Q19? From January 1st to present, BTC has been stuck in a range of $3,350 - $4,200. Yes, you could have day traded masterly and had a good quarter for top line profits, but as many of you know, fees can add up with an active trading strategy. If you’re more of a strategic/opportunistic trader looking for 10-15% moves over a weekly time horizon, you really only had 2 good chances to capture these gains throughout these last two and half months. And to that point, with how thinly traded the BTC market is right now, you can see these moves happen in minutes and you MUST be on top of position 24/7 (once again, not easy). So this brings us back to the initial question of the day; How can we make money in this market? In situations like these, it takes some creativity and courage to think outside the box and come up with new trading strategies or trade in areas that are not yet overtraded. This is the typical evolution of markets. Traders go to where money is most easily made, like water flows to the path of least resistance. As a strategy gets oversaturated (no pun intended) with traders using the same strategies, ‘edge’ diminishes. Therefore, these traders must find new strategies or products that give them their ‘edge’ back. BitOoda’s thesis is that the Derivatives Market will see the next wave of influx of traders into the space, trading products with leverage that they could not normally get in the spot market. To date, we see the sophisticated funds within the digital asset space entering this derivatives markets. Because of this evolution of the market, typical ‘wall street’ funds are knocking on the door, looking to learn about the dynamics of these markets, waiting to pounce when the moment is ripe. Our goal here is to facilitate the trading of these products, in a transparent and compliant manner, without conflict of interest that we are seeing so much of within this industry. The momentum is building for the agency brokerage model. It is only a matter of time that the Digital Assets Market will catch up to other mature market classes within typical financial capital markets.
COINBASE:BTCUSD
by BitOoda_LLC
Forward Curve - CALL WRITING STATEGYAs we’ve been having conversations with all kinds of players within the cryptosphere, we’ve noticed Index Fund managers as well Miners who are long-only are looking for additional sources of income. This piece will be to educate them in a potential CALL WRITING strategy that can satisfy their need for additional income. When entering a CALL WRITING program, one would typically sell the 20 to 30 delta out-of-the money calls somewhere between 3-6 months out. If the program outcome is successful, a fund will increase its yield by collecting the option premium. Let us walk through the potential trade and its outcomes: Assume you have a cost basis of $4,500 for your BTC. We would look at the BTC June (6/25/19) $6,000 Calls that are worth roughly $200. 1. If the underlying stays flat o Do nothing, sit back, and enjoy collecting the premium o At expiration (6/25/19), your cost basis would become $4,300 (original basis – premium = new basis) o Next Trade: analyze volatility curve and target appropriate calls to sell 2. If the underlying sells off to $2,500 (hypothetical) o You can ‘roll’ your short calls to a lower strike to increase the premium income making up for losses in the underlying asset. o Sell the $4,500 Call and buy back the $6,000 Call for a net spread of $100 ($100 is an assumption and would have other factors to dictate that price: time, vol, BTC price etc.) o At expiration (6/25/19), your cost basis would become $4,200 (original basis – total premium = new basis) 3. If the underlying rallies towards $6,000 (hypothetical) o You should roll the short calls ‘up-and-out’ (to a higher strike and a further month in the calendar year) o Hypothetically, we would try to buy back the June $6000 calls and sell December calls (maybe $9,000 strike) for the same premium. o The cost basis would remain the same @ $4,300, however you would not get called out of your BTC length if June settled above $6,000 When the premium on the short calls are miniscule, you can decide to buy them back, or let them expire. After this decision is made, you can start this process over and sell more calls to continue lowering the cost basis of your BTC. The risk to this strategy is that you are short calls that, if end up in-the-money, can be exercised – meaning you would have to deliver your BTC to the call purchaser. To prevent this from happening one should be rolling the calls ‘up-and-out’. If the opportunity to do this is missed (let’s say BTC gapped from $4,000 to $8,000 overnight), you would end up cutting your profits short. If this income generating program is something you would consider establishing, please reach out to us and let us know so we can hop on a call to discuss further. Contacts Tim Kelly Founder and CEO tkelly@bitooda.io Brian Donovan Executive VP of Institutional Sales bdonovan@bitooda.io Dr. Ilya Kurland Chief Derivatives Strategist ilya@bitooda.io
CME:BTC1!
by BitOoda_LLC
Overbought Short Opportunity EthAs you can see on the two downward upper and lower trend lines I called a short opportunity when ETH/USD was hovering around 242. Looks like that was the right call and it went down to 215. Would have been a nice little profit I would say. Now we are nearing overbought again comparatively similar to the last call considering the trend lines and where the price action lies at the moment within the trend. This could be another short opportunity. However the MACD is meddling with a cross which may signal that waiting for confirmation may be best. Lets wait and see if this gets rejected at 240. If it goes to 244 its a buy. If its rejected at 240 and we bounce back down to 237-238 its a short opportunity.
BITFINEX:ETHUSD
by ChristopherCook
How to Utilize the $VIX as a HedgeWhile the $VIX is a volatile index by itself, containing derivatives that can be fun to trade individually; it can also be used as a valuable hedge against a range of portfolios. While I had a tech heavy portfolio the last month and a half, I took tremendous short term gains anywhere between 10 and 15%. While holding the $VXX ETF to mimic movements of the $VIX, I used this derivative to hedge against sharp downfalls in this NASDAQ. Over the course of tech making a quick run, the ETF I held took losses of around 20%. This is why it is vital to take a holding relative to other positions - I usually do 1/3 position compared to fulls in my portfolio. This way the losses only really amounted to ~6.5% compared to a full position. Today on 6/19, a couple days after I liquidated all my tech positions (still holding $NVDA), the NASDAQ took a hit and the $VXX ETF is up 8.2% currently. This spike has erased losses to -10% for the position alone (~-3% to a full position) and has actually made me net green for the day even after suffering losses of 2.5% on $NVDA. Even though the $VIX is extremely risky by itself, I do think it contains great value as a hedge if utilized correctly.
AMEX:VXX
by HowardCapital
BTCUSD_M15_Derivatives analisysIf derivatives will confirm price swings, and shorts will became stronger on long's weakness, i see a short scenario considering the previous posts, if the weekly key level will be confirmed with a bearish momentum breakout and if the actual lateral market will create a distribution situation as mentioned before. I also know that on the M1 chart we are ATH , with several increasing minimums , which could represent another bullish setup if the long period trendline will be violated. By the way, there's not a short period entry setup yet, we have to break the round 700 and after the price has to show up a short pattern to confirm the analisys and to follow the short Key levels mentioned.
BITFINEX:BTCUSDShort
by E_Trade