link2205 link2206 link2207 link2208 link2209 link2210 link2211 link2212 link2213 link2214 link2215 link2216 link2217 link2218 link2219 link2220 link2221 link2222 link2223 link2224 link2225 link2226 link2227 link2228 link2229 link2230 link2231 link2232 link2233 link2234 link2235 link2236 link2237 link2238 link2239 link2240 link2241 link2242 link2243 link2244 link2245 link2246 link2247 link2248 link2249 link2250 link2251 link2252 link2253 link2254 link2255 link2256 link2257 link2258 link2259 link2260 link2261 link2262 link2263 link2264 link2265 link2266 link2267 link2268 link2269 link2270 link2271 link2272 link2273 link2274 link2275 link2276 link2277 link2278 link2279 link2280 link2281 link2282 link2283 link2284 link2285 link2286 link2287 link2288 link2289 link2290 link2291 link2292 link2293 link2294 link2295 link2296 link2297 link2298 link2299 link2300 link2301 link2302 link2303 link2304 link2305 link2306 link2307 link2308 link2309 link2310 link2311 link2312 link2313 link2314 link2315 link2316 link2317 link2318 link2319 link2320 link2321 link2322 link2323 link2324 link2325 link2326 link2327 link2328 link2329 link2330 link2331 link2332 link2333 link2334 link2335 link2336 link2337 link2338 link2339 link2340 link2341 link2342 link2343 link2344 link2345 link2346 link2347 link2348 link2349 link2350 link2351

First Long-Term LedgerX Bitcoin Option Pegs Price at $10,000

First Long-Term LedgerX Bitcoin Option Pegs Price at $10,000

First Long-Term LedgerX Bitcoin Option Pegs Price at $10,000

LedgerX just initiated its first long-term bitcoin futures option.

Called a Long-Term Equity Anticipation Security (LEAPS), the trade was matched by the platform this morning and is set to expire on December 28, 2018.

Under the terms of the deal, the buyer has the right to buy bitcoin at a price of $10,000 at that date, or almost a 30 percent premium on today's price.

Yet, because the buyer only makes money if the price is more than $10,000 (called the strike price), the investment can be seen as a reflection of the level of confidence that the price will reach that level by the agreed upon date.

Such long term futures options have long been seen in the industry as a much needed sign of maturity, and could in part help pave the way for even more institutional money to enter the space.

In an exclusive interview with CoinDesk, LedgerX CEO Paul Chou sought to position the milestone as just the first of many more before the cryptocurrency market can truly be considered mature.

Chou said:

"There will be, I expect, a lot more trades down the line. This is the first one, but it at least gives you the first guess from different institutional traders as to what bitcoin's dynamics will look like from now until 2018."

The trade option was listed by LedgerX late Friday night, and to Chou's surprise, two institutional investors agreed to the terms of the deal just one day later.

Under the terms, the buyer agreed to a price of $2,250.25 for the trade, meaning the seller collects that money if the price is less that $10,000 by the end of next year, and the buyer gets to purchase bitcoin at the strike price if it is higher.

Unlike a futures swap however, the buyer is not obliged to purchase the asset.

"If the price goes to zero, you don't have to pay $10,000 for it," Chou said. "But if a year from now it's at $20,000, then you can exercise your options."

Based on LedgerX's own calculations (made using the Nobel-prize winning Black-Sholes financial markets model), the startup believes there is a 25 percent chance that bitcoin will reach that level in the allotted time.

 

Soft launch

While this is the first LEAPS financial instrument matched by New York-based LedgerX, they've been conducting increasingly high trade volumes since their soft launch a month ago.

As reported by CoinDesk, LedgerX traded $1 million in bitcoin derivatives its first week of trading, ending Oct. 20.

Since then, the first cryptocurrency firm to be granted a derivatives clearing organization (DCO) license by the CFTC has posted a $1 million day, a $1.6 million day and on November 15, a record $2.6 million day.

Since LedgerX listed the LEAPS option at 5:30 Friday evening, Chou says they saw an additional $500,000 traded before midnight. "That's for a holiday week too," he said. "So we were shocked." He estimates the company has conducted approximately $16 million in notional bitcoin transactions to date.

While the startups numbers seem to indicated active early interest, legacy institutions such as the Chicago Mercantile Exchange (CME Group) and the Chicago Board Options Exchange (CBOE) have both recently revealed their own similar plans.

Though Chou hopes to maintain his first-mover advantage, he said there's no hard date to launch into full operation. Rather, his team wants to make sure the platform scales well beyond the 1 million messages it sends per day before this milestone. He says he'd be "surprised if that takes "more than a month," concluding:

"But it might be sooner."

 

Author: Michael del Castillo Nov 18, 2017 at 21:59 UTC

 

Posted by David Ogden Entrepreneur
David Ogden Cryptocurrency Entrepreneur

 

Alan Zibluk Markethive Founding Member