that's huge!

[Andrew Vorobyov]

https://bitcointalk.org/index.php?topic=161307.0

I told it very long time ago that this guy has problems with hedging his positions... here it comes...

[Ron Gross]

Day trading BTC is risky business...
I never believed in day trading myself. Buy & hold has worked out pretty well for me in the last two years.

On Sun, Mar 31, 2013 at 1:21 AM, Andrew Vorobyov <vora...@gmail.com> wrote:

https://bitcointalk.org/index.php?topic=161307.0

I told it very long time ago that this guy has problems with hedging his positions... here it comes...

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[Andrew Vorobyov]

It was not day trading - it was trading options on BTC.. he was market maker... 

[Ron Gross]

I see. Well, risky business in any case.

[Alex Mizrahi]

I told it very long time ago that this guy has problems with hedging his positions... here it comes...

Mircea provided 68342 BTC of bond capital.

On March 1st it was ~$2.2M USD (33 USD for 1 BTC)

On March 31st it was ~$6.1M USD (90 USD for 1 BTC)

-33% loss of bond capital: $2.0M USD

Net profit in USD: $1.9M USD.

[Andrew Vorobyov]

I don't understand what you are saying here..

I don't care how much money he earned before, I don't care how much money is left.

My point is because of not hedging his exposure he ran into big loss. 

Maybe I don't know whole picture - but that's what I see.

[Alex Mizrahi]

It was a loss if you count Bitcoins, but it wasn't a loss if you count US dollars equivalent.

Perhaps these option contracts WERE his was to hedge his position: if Bitcoin climbs up he still gets a nice USD-denominated profit.

If it falls, his loss is less than he would get otherwise.

I'll give you another example: suppose you decided to invest 20% of your money into Bitcoins.

As Bitcoins appreciate, their fraction in your portfolio grows, and you get more and more exposure to Bitcoin catastrophe risk.

If you do not want that, you should sell some of your Bitcoins, or use some kind of derivative contracts.

Meni actually has a formula for desired amount of exposure, and he designed some weird derivatives to manage this...

Anyway, when you're selling options, you know strike price, so you know that when you have loss on this specific option, Bitcoins which sit in your wallet will appreciate...

So you won't suffer USD-denominated loss if you do it right.

[Andrew Vorobyov]

rhttp://polimedia.us/trilema/2013/options-and-leverage-a-case-study/

Read reply to my comment... He does not hedge...

I understand what you trying to say but it's not an excuse for him.

Instead of being market maker and hedging the risk he was just on the opposite side of the trade for every body using his service.

Better of spend 1000 USD on options trading rather than taking 2.5 USD million lesson.

As far as I see he does not want to change anything. So one more time like this is just the matter of time

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