Of all the things to have a prediction market on the future value of something traded on a market seems among the least useful. If my prediction regarding the above was positive then I would bet by buying a lot of bitcoins (which are currently priced below the lower bound).
Indeed. In kiba’s case, he’s holding onto around 1000 or so bitcoins and doesn’t have any cash to spare for buying more. (Personally, I think he’s dangerously undiversified and should—at the very least—have sell orders in at 5 or 10 bucks.)
That’s a much stronger (in both senses) point! I asked the resident Person Who Knows Economics and got the following answers:
“Leave me alone, I gotta poop.”
Options give much greater leverage. The mysteries of option pricing are not spoken of to the uninitiated, but a 5% change in a stock’s price is very roughly a 100% change in the prices of options to buy or sell 5% away from the initial price.
I make no claim about the competence of the Person Who Knows Economics except that’s it’s greater than mine.
Options give much greater leverage. The mysteries of option pricing are not spoken of to the uninitiated, but a 5% change in a stock’s price is very roughly a 100% change in the prices of options to buy or sell 5% away from the initial price.
Yes, they save you getting a loan. More important in this case is short selling. Options are still only useful if the price goes up. That gives the predictor something to do when their predictions are that the price will fall. If the actual market is sufficiently developed as to allow that kind of trade the prediction market becomes rather redundant.
Of all the things to have a prediction market on the future value of something traded on a market seems among the least useful. If my prediction regarding the above was positive then I would bet by buying a lot of bitcoins (which are currently priced below the lower bound).
Indeed. In kiba’s case, he’s holding onto around 1000 or so bitcoins and doesn’t have any cash to spare for buying more. (Personally, I think he’s dangerously undiversified and should—at the very least—have sell orders in at 5 or 10 bucks.)
Er, you know what options are, right?
Roughly speaking… part of the point.
That’s a much stronger (in both senses) point! I asked the resident Person Who Knows Economics and got the following answers:
“Leave me alone, I gotta poop.”
Options give much greater leverage. The mysteries of option pricing are not spoken of to the uninitiated, but a 5% change in a stock’s price is very roughly a 100% change in the prices of options to buy or sell 5% away from the initial price.
I make no claim about the competence of the Person Who Knows Economics except that’s it’s greater than mine.
Yes, they save you getting a loan. More important in this case is short selling. Options are still only useful if the price goes up. That gives the predictor something to do when their predictions are that the price will fall. If the actual market is sufficiently developed as to allow that kind of trade the prediction market becomes rather redundant.
I fail to see what breaks the symmetry between put and call options.
s/up/in the direction of the option/