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How an obscure OTC-traded derivative from the 80s took over crypto

blog.everstrike.io

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Re: How an obscure OTC-traded derivative from the 80s took over crypto

#41

Post by JacobAldridge »

pcthrowaway wrote: post #25
monero-xmr wrote: post #24

Earlier quoted context omitted.

Best investment I ever made was in my children. Second was crypto!

Shit, I never invested in children, everyone said it was a negative RoI.

Children are an insurance policy - negative EV for sure, but if you raise them right, and they do alright, and you hit skid row in your dotage then they’ll take you in and provide free food and board for the rest of your life.

Ice floes were always a risk to policy fulfilment, so Boomers invented Global Warming to remove them.

Re: How an obscure OTC-traded derivative from the 80s took over crypto

#42

Post by doubleg72 »

charlieyu1 wrote: post #37
smabie wrote: post #15

Perpetual futures are so nice compared to regular tradfi ones. Having to roll over your ES or NQ futures serves no purpose (and it's not like any other future besides the front month is liquid anyways) and is probably just a scam by CME to induce more trading volume. That being said regular futures do make sense for stuff like commodities.

The oil future prices drop to negative in an exchange in 2020. Funds rolling over the contract in subsequent months also took a big loss for rolling over contracts because price disparity in different months. Perpetual futures would eliminate such risks.

The facts regarding crude futures dropping to negative a day in 2020 are actually more to do with the fact every bit of storage in the US was full. The companies closing contracts were hedged by this point anyways, as demand had all but dried up completely. Perpetual futures would go against the entire point of having contacts for specified length of time. That point is time itself, the other major variable in finance.

Re: How an obscure OTC-traded derivative from the 80s took over crypto

#43

Post by yareally »

RileyJames wrote: post #16
smabie wrote: post #15

Perpetual futures are so nice compared to regular tradfi ones. Having to roll over your ES or NQ futures serves no purpose (and it's not like any other future besides the front month is liquid anyways) and is probably just a scam by CME to induce more trading volume. That being said regular futures do make sense for stuff like commodities.

Doesn’t that beg the question? Why hasn’t a platform capitalised on the perpetual future in tradfi markets. I can understand why CME might not. But why wouldn’t a new entrant like robinhood launch perpetual futures?

The liquidity would be terrible and all retail trading. Most CME futures are bought and sold by Market Makers, not us retail little guys. The liquidity on Nasdaq (NQ) or S&P (ES) futures are so impressive that I can put in a sell stop order with a limit of only 1 tick from the stop and it will always fill outside of major market events.

Re: How an obscure OTC-traded derivative from the 80s took over crypto

#44

Post by 2Gkashmiri »

doubleg72 wrote: post #42
charlieyu1 wrote: post #37

Earlier quoted context omitted.

The oil future prices drop to negative in an exchange in 2020. Funds rolling over the contract in subsequent months also took a big loss for rolling over contracts because price disparity in different months. Perpetual futures would eliminate such risks.

The facts regarding crude futures dropping to negative a day in 2020 are actually more to do with the fact every bit of storage in the US was full. The companies closing contracts were hedged by this point anyways, as demand had all but dried up completely. Perpetual futures would go against the entire point of having contacts for specified length of time. That point is time itself, the other major variable in financ…

I was on hn or reddit and I wished someone would buy an oil tanker for like $1 and sell for -1 if possible but for a brief period, I'd have owned a freaking oil tanker. Sadly couldn't convince anyone. Sad sad really. It could've been a nice story today.

Re: How an obscure OTC-traded derivative from the 80s took over crypto

#45

Post by costco »

monero-xmr wrote: post #20
greggsy wrote: post #13

> “The only question is: Which exotic derivative will be the next? At Everstrike, we think it will be the everlasting option.” Wasn’t expecting that promo at the end, but who am I kidding, no one writes seriously about crypto without promoting something.

If you are an American and want to experiment with perps and aren’t confident with defi, you can become a Palauan resident and trade on Bybit (Dubai) and some other offshore exchanges legally. https://rns.id/

How is Palau this time of year?

Re: How an obscure OTC-traded derivative from the 80s took over crypto

#46

Post by bandrami »

ourmandave wrote: post #10
hippich wrote: post #5

Earlier quoted context omitted.

First time hearing about Zero coupon bonds and Perpetual bonds... Nonetheless, wouldn't author's description of perpetual zero coupon bond apply to many (most? all?) fiat currencies as well, since these are not really backed by anything anymore?

From OP link: The value of cryptocurrencies, in spite of a collapse in value, is stopped from falling to their natural value, i.e. zero, by a combination of market manipulation, investor ignorance and a tsunami of lies on social media from those paid to promote these worthless frauds. Which isn't how the US government backing the USD works at all.

It's not a Ponzi scheme if you have aircraft carriers (people think I'm joking but that difference is real and important).

Re: How an obscure OTC-traded derivative from the 80s took over crypto

#47

Post by Zpalmtree »

maxbond wrote: post #9
hippich wrote: post #5

Earlier quoted context omitted.

First time hearing about Zero coupon bonds and Perpetual bonds... Nonetheless, wouldn't author's description of perpetual zero coupon bond apply to many (most? all?) fiat currencies as well, since these are not really backed by anything anymore?

You can think of currency as a negative coupon bond, even - if you hold onto cash you generally expect it to lose value. In order to function properly as a currency, an asset needs to be the least volatile liquid asset available in the economy (or at least to be competitive along this axis). The expectation the asset will slowly depreciate is compatible with this requirement. The expectation that your currency is a h…

I don't understand claims like this, if the net present value is zero, why is the price not zero? You have to convince yourself that everybody trading or holding the cryptocurrency is deluded and just playing a ponzi scheme with each other, but even if you believe this, those participants itself believe it has value.

Who is value set by, if not the market?

Re: How an obscure OTC-traded derivative from the 80s took over crypto

#48

Post by FabHK »

One thing I haven’t seen getting enough attention is the interest rate you pay for the loan implicit in taking out a leveraged position.

For a future with a fixed expiration date, you can easily compute the implied rate by looking at the basis and time to expiry. Back around 5 years ago, you could lock in 80% or so interest p.a. risk free [1] by buying Bitcoin and shorting the future (eg on BitMEX). Everyone else that was yoloing long the future paid that (somewhat hidden) rate.

With a perpetual, you can’t lock in the rate (until the expiry, as you can on an ordinary future), but it depends on the funding paid (every 8 hours) over that period. It might well be the same, but would basically depend on the long or short sentiment of the crowd, integrated over that period.

At any rate, seems like most people ignore that substantial cost (which was and presumably is arb’ed and exploited by more sophisticated players fleecing the plebs).

[1] “risk free” modulo exchange/ops risk, which is substantial as FTX and others demonstrated.

Re: How an obscure OTC-traded derivative from the 80s took over crypto

#49

Post by Zpalmtree »

ourmandave wrote: post #10
hippich wrote: post #5

Earlier quoted context omitted.

First time hearing about Zero coupon bonds and Perpetual bonds... Nonetheless, wouldn't author's description of perpetual zero coupon bond apply to many (most? all?) fiat currencies as well, since these are not really backed by anything anymore?

From OP link: The value of cryptocurrencies, in spite of a collapse in value, is stopped from falling to their natural value, i.e. zero, by a combination of market manipulation, investor ignorance and a tsunami of lies on social media from those paid to promote these worthless frauds. Which isn't how the US government backing the USD works at all.

They're really worth nothing everyone is just being tricked :((

Re: How an obscure OTC-traded derivative from the 80s took over crypto

#50

Post by FabHK »

zhte415 wrote: post #12
maxbond wrote: post #9

Earlier quoted context omitted.

You can think of currency as a negative coupon bond, even - if you hold onto cash you generally expect it to lose value. In order to function properly as a currency, an asset needs to be the least volatile liquid asset available in the economy (or at least to be competitive along this axis). The expectation the asset will slowly depreciate is compatible with this requirement. The expectation that your currency is a h…

Cash does not have a negative coupon. Cash has no coupon. I feel introducing quasi terminology helps confuse rather than help. Index linked bonds, I think you're getting at the concept by talking about inflation, are linked to price changes. Check the actual price index (CPI, RPI, etc) of linkage for what price changes. Most bonds are not index linked, not hedged against inflation, and have a fixed coupon. Whether or…

Cash has no coupon, so it has negative coupon as soon as you switch your analysis to real terms.

In fact, in the context of the fundamental theorem of asset pricing (every asset discounted by a suitable numeraire is a martingale under the probability measure induced by that numeraire), cash isn’t even an asset (instead, the interest bearing bank account is one).

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