Bitcoin woes: Options bought for $1 million will soon be worthless

By: | Published: December 7, 2018 7:46 AM

Purchased for almost $1 million on LedgerX’s trading platform just days after Bitcoin peaked a year ago, the call options have a strike price of $50,000 and an expiry date of Dec. 28, 2018.

Bitcoin woes: Options bought for million will soon be worthless

The biggest-ever bet on Bitcoin options is about to expire worthless.

Purchased for almost $1 million on LedgerX’s trading platform just days after Bitcoin peaked a year ago, the call options have a strike price of $50,000 and an expiry date of Dec. 28, 2018. For the contracts to retain any value at expiry, Bitcoin would need to rally more than 1,400 percent.

The options’ almost certain wipeout is a less-than-ideal outcome for the buyer, but it may not be quite as bad as it seems.

Ari Paul, a cryptocurrency fund manager at BlockTower Capital, has indicated that he bought the options while simultaneously selling some of his fund’s Bitcoin holdings. In a December 2017 interview with CNBC, Paul said the trade allowed him to lock-in some profit, reduce exposure to market declines and potentially earn a big payout if Bitcoin soared above $50,000.

READ ALSO | OPEC talks end without oil-cuts deal as Russia holds back

When the options were purchased, causing a stir in crypto circles, Bitcoin was trading at about $16,200. The virtual currency has since become mired in one of the worst bear markets since its inception a decade ago, and extended losses on Friday, falling 7.7 percent to $3,360.08 at 9:05 a.m. Hong Kong time, consolidated prices compiled by Bloomberg showed.

“These calls let me capture upside while reducing my downside risk,” Paul told CNBC. He later tweeted that the trade — selling some of his Bitcoin holdings while buying the call options — was profitable.

Paul, a former portfolio manager at the University of Chicago endowment, didn’t disclose the performance of his entire fund. BlockTower declined to comment.

LedgerX, the first U.S.-regulated Bitcoin options exchange, declined to identify the buyer or seller of the calls but confirmed that the position, which has a notional value of $13.75 million, remains the biggest Bitcoin options trade to cross its platform.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition