1/ I have been asked about the mechanics of buying a #BTC option on an exchange which operates in #BTC (not USD) like Deribit or Phemex. This causes confusion, unsurprisingly. We are used to exchanges which operate in USD with a strike price in USD.
2/ Deribit, for example, operates in #BTC. Prices of options ON #BTC and thus profits FROM #BTC options are denominated in #BTC. You don’t come across USD except for the strike price.
3/ So when I bought a 160,000 Call expiring 31-Dec-21 this morning when #BTC was at about $57.3, I paid 0.0510 #BTC. Or $2,963. The questions were asked – what happens if it expires at #BTC $60,000, $120,000, $160,000 or $200,000
4/ If on 23rd December #BTC is at $160,000 my option is worth $3.70 = effectively zero. If it is at $60,000 or $120,000 its IS worth zero. But at $200,000 it is worth $40,595 dollars. Or 0.20 bitcoin. My amount of bitcoin has gone up 4x; my investment in $ has gone up 13x.
5/ If on 23rd December #BTC is at $250,000 my option is worth $90,017. Or 0.36 bitcoin. My amount of bitcoin has gone up 7x; my investment in $ has gone up 30x.
6/ So in summary I have taken out a highly geared long position on #BTC in which I have invested $2,963. If #BTC gets close to the s2fx numbers this year, I might take home $90,000. And the worst that could happen is I lose $2,963.
Last night I used the remainder of my £20,000 of bitcoin at Derebit to add another 1.8 of 100,000 Dec call to my fledgling portfolio of £20,000 invested. Will keep you posted.
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