Crypto-Trading vs. Options Trading
17 comments
Quantum computing doesn't solve all the problem.
Some crypto are quantum-resistant while others not.
Additionally, it has its own complexity, not everything is O(1), and there may have some errors during the calculation.
The initial idea of Nakamoto was great. However, you need an interface between our money (Dollar / yen / euro) to buy it or exchange it against goods, which makes it prone to state taxation / regulation.
So now I see it less interesting than option trading, as you need to put your hand in the dirt to get your crypto, keep your private key safe, etc. for at the end having the same legal obligation for tax income.
The initial idea of Nakamoto was great. However, you need an interface between our money (Dollar / yen / euro) to buy it or exchange it against goods, which makes it prone to state taxation / regulation.
So now I see it less interesting than option trading, as you need to put your hand in the dirt to get your crypto, keep your private key safe, etc. for at the end having the same legal obligation for tax income.
Hey, thanks, good point. Indeed there are quantum-resistant ledgers, those would survive the quantum computing apocalypses :)
Regarding the regulation, I should have definitely mentioned it.. Some countries (like the UK) get really tough on cryptos.
Regarding the regulation, I should have definitely mentioned it.. Some countries (like the UK) get really tough on cryptos.
Not sure why you’re comparing crypto and options in the first place.
They are not used for the same thing at all.
Options are either for hedging risk or for betting on the market. They’re great if you want a highly leveraged, casino-style-get-rich-quick scheme.
Cryptos are assets, so buy/sell like anything else.
They are not used for the same thing at all.
Options are either for hedging risk or for betting on the market. They’re great if you want a highly leveraged, casino-style-get-rich-quick scheme.
Cryptos are assets, so buy/sell like anything else.
Hey, you're right crypto and options are different asset classes. Although even then there is an overlap: you can buy BTC or buy calls on BTC futures, which is a similar speculation on BTC price rising.
What I actually compared was the 2 activities: trading options vs trading cryptos, since from my understanding both activities share the same goal: growing a personal wealth.
What I actually compared was the 2 activities: trading options vs trading cryptos, since from my understanding both activities share the same goal: growing a personal wealth.
lol if quantum computing reaches even hundreds of qibits all your bank accounts and stock exchanges would be in whole lot more trouble than crypto.
with crypto you can just fork a new quantum resistant function or even just increase the key sizes & fork away. even if you managed to break some wallets it will be reverted due to fork. can't imagine your stock exchange pulling something like that off
with crypto you can just fork a new quantum resistant function or even just increase the key sizes & fork away. even if you managed to break some wallets it will be reverted due to fork. can't imagine your stock exchange pulling something like that off
Indeed, that would be a challenge for all web-reliant industries, although from what I understand it must be a minimum of 10k properly operating (i.e. noiseless) qubits to implement the Shor's algo..
I'm clueless on this subject, so bear with me. Do you have an opinion on Binance offering 125/1 leverage? If you were to look at where the profits come from for these companies, might we make a case that these companies are building tools for gambling? I would love to hear more though. Maybe you write elsewhere or could point us to some entry level material?
tbh I am more into options trading than crypto.. I know that Binance is facing an increased scrutiny worldwide, in some countries (like the UK) it's outright banned..
The key thing to keep in mind regarding Binance is that there is a HUGE counterparty risk, so if Binance goes bust all your positions won't be recovered.. This lack of safety is a major concern for both investors and regulators. Plus Binance was completely non-transparent where their capital buffer would come from..
The key thing to keep in mind regarding Binance is that there is a HUGE counterparty risk, so if Binance goes bust all your positions won't be recovered.. This lack of safety is a major concern for both investors and regulators. Plus Binance was completely non-transparent where their capital buffer would come from..
Options trading is not new or novel at all. Maybe new to you.
Hey, thx for your comment.
I spent years trading options professionally:) Options trading is not a novelty, retail options trading (for the many) still is.
Do you have any numbers regarding retail options trading prior to the arrival of RH?
I spent years trading options professionally:) Options trading is not a novelty, retail options trading (for the many) still is.
Do you have any numbers regarding retail options trading prior to the arrival of RH?
Where I’m from spread betting and CFDs have been fairly big for decades and options fall into that - strikingly similar to Robinhood in how they’re used.
RH style option trading has obviously gotten a lot of press because of its popularity but away from that investors have been using the buy-write strategy for decades and the options strategy etfs are a big business too.
RH style option trading has obviously gotten a lot of press because of its popularity but away from that investors have been using the buy-write strategy for decades and the options strategy etfs are a big business too.
Hey, as I understand you are from the UK.. indeed gambling has been a big business there for many decades, it's not even being taxed over there! And CFDs & spread betting fall into that category.
And I do agree that RH somewhat gamified options trading turning it into gambling. But my view is that options trading should not be like that. People should have appropriate tools so they can clearly understand their risks and use options for hedging and profit boosting.
And speaking of the UK most ppl are still completely unfamiliar with options trading and the benefits of it.. many label it as just another way to gamble, which is a shame..
And I do agree that RH somewhat gamified options trading turning it into gambling. But my view is that options trading should not be like that. People should have appropriate tools so they can clearly understand their risks and use options for hedging and profit boosting.
And speaking of the UK most ppl are still completely unfamiliar with options trading and the benefits of it.. many label it as just another way to gamble, which is a shame..
Absolute drivel..
Hey Morten, thanks for your comment.
Would you mind to clarify what exactly you find to be a non-sense? I am aware that there is almost no options trading in Denmark (in fact worst in the whole Europe). Which is funny given that all its neighbours (Netherlands, Sweden, Germany) have relatively ok options markets. So indeed, if you never heard of options then it's quite likely to you it sounds like some alien nonsense..
But I would really appreciate to hear your thoughts on crypto. The Danes I know tend to be super conservative (imo) and advocate a complete worldwide ban on crypto.. Are you one of them??
Would you mind to clarify what exactly you find to be a non-sense? I am aware that there is almost no options trading in Denmark (in fact worst in the whole Europe). Which is funny given that all its neighbours (Netherlands, Sweden, Germany) have relatively ok options markets. So indeed, if you never heard of options then it's quite likely to you it sounds like some alien nonsense..
But I would really appreciate to hear your thoughts on crypto. The Danes I know tend to be super conservative (imo) and advocate a complete worldwide ban on crypto.. Are you one of them??
a lot more alpha and arbitrage opportunities in crypto though.
Arbitrage opportunities for sure, due to a relatively high options liquidity there is much less of that edge.
Regarding the alpha itself, BTC and ETH positions can be replicated with options. Apart for long-only position you can go short on Bitcoin or even speculate that the price level would stay the same.
Regarding the alpha itself, BTC and ETH positions can be replicated with options. Apart for long-only position you can go short on Bitcoin or even speculate that the price level would stay the same.
Unlike stock trading and mutual funds investing, both crypto-trading and options trading are novelties to the majority of US public. And it comes as no surprise that for many they still evoke a healthy dose of suspicion and cautious distrust.
Speaking of options trading, in the early 2000-s there was a number of attempts to democratize it (Zecco, TradeKing, etc.) by introducing zero options commissions and creating options-focused knowledge groups. However, those attempts were hindered by the financial crisis of 2008. First of all, people were spooked away from the markets and lost trust in the financial system in general. As such retail trading activity dropped sharply. And second, to revive the economy the Fed decided to cut its key interest rates that severely damaged the revenue stream of low-cost brokerages. After a prolonged “retail brokerage winter” the second wave of retail options trading started in 2015 when Robinhood’s trading app went live.
Crypto in turn was born out of the economic crisis: the famous paper "Bitcoin: A Peer-to-Peer Electronic Cash System" was published in October 2008. Many more crypto currencies have emerged since then. Initially crypto trading had been a realm of techies and tech-savvy hobbyists given its limited user-friendliness. There were a few crypto “exchanges” that more often than not employed shady practices at the expense of their customers.
So both activities are relatively new, have already gained significant number of supporters/practitioners as well as skeptics that outright label them as “gambling”.
And although participation in both activities is primarily driven by a potential monetary benefit, here the similarities end. Options trading in my view is superior to crypto-trading for the following 3 reasons:
1) MUCH more investment freedom 2) Limited counterparty risk 3) Less susceptible to quantum computer attack.
So first of all, in crypto trading ppl bet that their coin would go only one direction: upwards. With options (on stocks, index, commodities or even Bitcoin futures itself) everyday traders gain a possibility to speculate on the downside of the price, like protecting themselves from a potential market crash. In fact, if someone believes that the underlying prices would stay EXACTLY SAME they can still benefit with options. It’s worth mentioning that currently options available only for the 2 major cryptos: BTC and ETH although things might have already evolved.
Second, there is a potential counterparty risk for crypto trading. The cases are numerous when investors were duped by the rogue crypto exchanges. Such risk does not exist in options trading thanks to the OCC.
Lastly, functional quantum computing might arrive in a distant future or might even not materialize at all. But if it does most cryptos (as well as their owners) would be in trouble. Quantum computing might also profoundly disrupt options market but even in that case there will be not only losers but also some big winners.
P.S. Spending my career in options trading I realize that I’m pretty likely to be biased in my judgment, so I would love to hear any counter-arguments.