I remember your website. I was at a hedge funds that used your service. I had a few conversations by email and by phone with your partner too (nice guy and went to a good MBA school if I remember). I understand why there were maybe bigger and better opportunities vs return on time needed to keep doing your activist short site going as it is quite niche. Are you involved in the space at all any more?
For others reading here and in case curious, the hedge fund I was working at wasn't interested in paying for access to tracking of activist short campaign data for the short trade ideas themselves. There is little interest in copying or jumping onto another's trade like that. The real interest the hedge fund wants to get alerts and track these campaigns was to keep an eye on what other hedge funds are doing - it was more about competitor and industry colleague research than securities research.
Hey Michael, nice article. I saw in a comment you said students frequently ask you "how do I come up with a good startup idea?" and I know in the article you also included "This by no means the only path to an MVP...but it is a path that I’ve seen work for a number of YC companies."
I wanted to share something tangential that has worked for me as I also speak to students regularly and get the exact same question every time. My response includes the standard "Is there a problem you are passionate about?". But I've also observed how many students don't see problems as "problems" when asked to brainstorm about it and many would-be entrepreneurs end up left out of the process and discussion. I'm not sure all the reasons why but maybe a pain point isn't significant enough for them to label it a "problem" in their head when asked ("oh that's just an inconvenience not a real problem"). Or maybe their personality leans toward accepting status quo without realizing it can be changed and they can be the ones to change it. Or maybe they are too shy or introverted at first to describe and complain of a problem out loud.
So I've modified my response to students a bit to include: I have seen startup ideas come from 1. An idea for a solution to a problem and 2. An idea for something "that would be awesome" if someone created it but no one has yet or at least not done a good job of it. Here's what I mean by "that would be awesome" ideas, to take the example of Justin.tv, it leads to the same startup being created but 2 different types of entrepreneurs might get there by thinking:
1. What's a problem you experience and want to solve: "TV used to be entertaining but TV shows now feel stale, boring and with writing that feels so formulaic."
2. What is something "that would be awesome" if someone created it: "I love TV and movies, The Truman Show is one of my favorite movies, it would be awesome if someone made a TV show for based on following someone's life similar to The Truman Show but for real and with real people not actors".
Same startup. Two ways to get there. Hopefully this all makes sense. I've had good results engaging with students by adding the "that would be awesome if that existed" to the ways to think of startup ideas. This especially true with students who are shy or less likely to complain about problems out loud for some reason as well as for students who know how lucky they are to be at a fancy university in a first world country and they feel guilty describing anything as a problem worth solving if it isn't on the level of world hunger or similar (in which case I encourage those students to go solve world hunger if that's what they want to do).
Also one more thing. In my opinion the real major problem for aspiring entrepreneurs, bigger than coming up with a problem to solve, is how to brainstorm!
Most people assume brainstorming is just "sit and think". And it can be that and some people are very good at that (and other people aren't good at sit and think brainstorming at all but they just get lucky and a good idea pops in their head one day). But there's a lot of literature out there with research on effective brainstorming as well as tips and tricks to get one's brain into a better brainstorm mode (hint there's a reason why so many people say their best ideas come while showering or jogging). I am outside the valley so your mileage may vary over there but I see guided brainstorming sessions work much better than the usual casual 'shoot the shit type brainstorming' for the majority of people as brainstorming doesn't come naturally to them. Hence everyone has 99 problems and no good ideas.
The most popular thing I do when talking to students is a class discussion to come up with a problem and get the entire group of students brainstorming and iterating solution ideas together, with the goal being "find the first 5 feasible but bad solutions" (Asking them to come up with a "good solution" is too much pressure and then no one wants to raise their hand to say an idea others in the group might think is bad, so it helps to make clear it's OK we don't need good ideas at this point). Another thing that helps is I hand out index cards to start things and get students to anonymously write down one "problem to solve" idea or one "That Would Be Awesome" idea. I collect the cards and pick the idea that best facilitates brainstorming and discussion to start things off and then do guided brainstorming together. Most students have never been part of a real brainstorming session beyond some brainstorming how to do a group school assignment that gets an A and isn't too much work for everyone and that really they don't care about. Real brainstorming is hard and they have never done it for real in a group setting.
Sorry for the long comment. Just wanted to share something that has worked for me getting more students more involved in entrepreneurship, especially for the types of students who currently are under-represented among the population of founders these days for whatever reasons. Yes. Also shout out to my fellow shy introvert founders and anyone who doesn't walk around all day thinking about problems or like complaining about them. It's OK to start a company with the goal to make something awesome a reality, everyone has 99 problems and zero good ideas, try thinking up something awesome instead.
Some variations of RSI factor in volatility which this guy's Bitcoin version appears to do.
Worth saying here, there is no empirical evidence for indexes indicators like these or the million other versions of it to have any basis in reality for predicting price movement reliably. Pretty obvious Bitcoin markets in 2011 were nothing like Bitcoin markets in 2017. Said another way "Sometimes I trade bitcoin but I only buy on Tuesdays, my best friend only buys bitcoins on Thursdays, and my performance trading Bitcoin is better than my friend's. So Tuesdays are the best time to buy Bitcoin, see previous sentence for evidence why". Also this article from investopedia appears to be another sponsored marketing content not a journalism article.
Our website promoting local short-term small businesses like popup shops and food trucks and "summer businesses" launches January 1.
Our first feature story is an article and podcast interview about the Christmas tree store popup business.
We are working on several feature stories about "summer businesses" that people like school teachers start and run during summer holiday months before going back to their "real" job in September.
The contestant selection for the Price is Right television show isn't random. You're spot on, a producer selects the contestants based on a quick interview with each audience member before the show. Even if the selection process has changed recently this story is from 2008. The article is wrong. And this website appears to be spun click traffic farming site, way to go Hacker News.
> All contestants’ names are randomly drawn prior to start of show. If a person selected as a contestant is a non-ticket holder, they will be brought inside the venue by producers to await their turn as contestant.
Even if, as you say, this citation is too recent and reflects some more recent change, and the selection wasn't literally random, he'd still have to somehow be chosen, which doesn't seem entirely within his control.
That link is not to the Price is Right TV show. The "Price is Right" brand has a traveling live theater production as well called Price is Right Live. Tickets to that cost money. Tickets for the real TV show in Los Angeles are free. Thanks for playing.
Let me add to the amazement by pointing out that there even seems to be "Price is Right fanfiction" out there [0].
Tho it's hosted on angelfire and the texts are saved as word documents, which is either really odd or really smart, depending on the intentions of the creator.
You "corrected" someone out of ignorance who knew your correction was wrong. I think you need to swallow your pride rather than complain about their being condescending; feeling humiliated is your brains way of learning to be more careful in the future.
I expect I made a mistake here too, that would be normal in this sort of conversation.
No. The price never reached a 570% gain so your "most likely" is impossible. The error in the article confusing percentage and multiples is one of a common math errors and the most likely explanation. 382 is 5.7x the price paid or (382/67). That's not 570%. It's 470%.
The most likely explanation is the majority of bloomberg reports know almost nothing about finance or math. Unfortunately and sadly it's still some of the best finance journalism available as there's little competition.
Very difficult to lose 75%. Takes skill. The psychology of traders in any market, especially amateur traders, is such that loss aversion kicks in much stronger and quicker than they realize and many traders will get scared and sell during short term lower % price drops before -75% could even happen to them. Some exit after -20% losses, some hold until -50%. When the moon door opens, losses on the way down are usually spread among many traders trying to catch a falling knife.
The burned traders phenomenon could become a problem for the bitcoin community though few will talk about it. As even if the price recovers after a drop the people who thought they could trade it and lost money when they sold during a short term drop often leave the market and don't return. The same phenomenon happens in the stock market, and stock trading is a ginormous industry compared to bitcoin...amateur traders lose money trading stocks, they leave the market and never return. It's a problem..cue up the next E-Trade baby commercial ASAP! [1]
The Bitcoin big money now knows they need to control the volatility and spend hard and fast on marketing their trading platforms to new people constantly. And that's exactly what these guys behind the scenes appear to be trying to do. Hence we end up with articles like this one: Bloomberg writing about "Bitcoin Traders Claim..." that's basically one interview (at a coffee shop) with one random dude in his early 20s who trades bitcoin in his spare time. Who is the target audience for this 5th grade book report journalism? The churn will be huge.
Yes gamblers or speculators or whatever they may be called could go to casinos in person. Or gamble via online poker. Or go bet on a horse race. Or on sports via a bookie. Or trade bitcoins from their phone. Just different games for different tastes and currently legal.
You're the CEO of this company? Well congrats on the WSJ article.
Can I ask who books writing a large trade like this? Basically are you making this market and $1 million dollar trade like this would need to contact you guys to write it OTC? Or is the crypto options market supply that big and liquid already that a buyer can just come along and buy $1 million worth of Dec 18 Bitcoin call options that will clear?
A call option also means someones else took the other side of this trade. Who sold $1 million dollars worth of December 2018 Bitcoin $50K call options?
Also there's a back of the envelope implied volatility for Bitcoin here: on a $3k call option premium 12 months out (so breakeven on this "bet" is actually $53,000) Bitcoin implied volatility of around 120%? Not that equity option pricing model theories apply to Bitcoin, or even work as expected on equities for that matter, but it's interesting to see an implied volatility number regardless. Looks like Delta less than 10. With Futures already 3 months out at $17,000 it would seem like whoever sold this call option for $1 million could hedge (not perfectly hedge) the trade for less than $1 million. Oddly enough, both the buyer and the seller could end up profiting on this option trade.
I agree this article is very bad, it feels like a paid PR article advertising for the trading company not actual news.
Someone who's already long a ton of bitcoin could write those calls without adding any risk, collecting a little bit of yield and sacrificing only the extremely-far-out-of-the-money potential upside of $50k+ on his long bitcoin.
The implied volatility at which this option traded is pretty irrelevant for helping us understand the option market as a whole, since it's so far out of the money. We don't have much information about what the upside skew would look like. And due to vanna, that delta calculated off that implied volatility is irrelevant too.
You're right. And I agree, the missing info about the contracts and the overall derivatives market here plus the expiration and strike being so far away makes calculating IV or delta or vega or convexity or well calculating anything pretty irrelevant and has little to zero practical use.
Plus we are talking about Bitcoin! so none of this is relevant. The old option theory bullshit has even less rigor beyond fun mental exercise. I still think it's interesting and gota start somewhere, and we'll see how things develop in this market. I did try to qualify in my comment writing something how calculation not really applicable to Bitcoin and doesn't even work on equities properly. But again you're right and I should have worded my comment differently, probably a bad lazy old habit to even use weird finance terms on non-finance forum like HackNews, so maybe could have said something like 'wow interesting to see someone paid 20% of the current price for an option with a strike that has bitcoin gaining +200% in the next 12 months'?
I would guess this is some sort of covered call as you suggest. It's only 275 bitcoins and a 20% premium on the spot price seems like a decent yield for so far out the money. I'm not a bitcoin trader but it's my understanding from what I've read there was no short side price discovery until very recently when derivatives started trading so volatility has no historical nor frame of reference. Bitcoin options could be super inexpensive deal right now or way overpriced there's no basis to say either way but there does seem to be enough inefficiency across various markets for arbitrage if someone wants to make the effort.
> The old option theory bullshit has even less rigor beyond fun mental exercise.
Well, it actually tells you how to hedge and thus replicate the option. That's quite valuable in practice (even if it needs modification from pure theory), despite Taleb's rants.
Hedging is a valuable practice. But my point was the old option modeling, Black-Scholes for example, doesn't work in Bitcoin markets: firstly because Bitcoin markets don't have the same structure or offer the same inputs as equities markets. And secondly because equity option theory doesn't even work in real world equities if we're being honest. Options do a decent job as rough short term guidelines for hedging and replication, in a few corners of the market that have gained enough efficient liquidity in options (such as large indexes and small number of single names) but hedging beyond there is an active challenge. One obvious sign maybe that option models don't work so well outside of their assumption-filled theory is how the options market makers still need so many humans involved in subjectively managing the risk on their books every day - if a theory and its models are strong and "tells you how to hedge" why can't computers calculate the next move and hedge risk with a click of a button automatically? Hedging in bitcoin would be questionable (if not laughable) right now, you can still do it of course and maybe shoddy guess hedging is better than nothing? But what's a fair price for bitcoin insurance over the next day, month, year?
The problem is that the volatility of BTC should be priced off tail risk more than gaussian drift, and that's not a rigorous part of the theory. Black-Scholes certainly doesn't characterize the tails very well.
Nice comment, you seem like you know your stuff. My opinion is without fundamentals or historical or correlated assets here you can't price tail risk beyond throwing a dart. Look at the Futures margin reqs, it's like 40%. A ridiculously high number and that's probably still a compromise because they halt trading for the day around 20%, otherwise I imagine there would be almost no margin given. Price of tail risk is not being priced.
Given the realized vol of bitcoin, 50k is not very far out of the money. Bitcoin doubled between end of November and mid December. And it's 20 times the value it was a year ago...
Their volume is abysmal. Nobody trades there. They know they're missing out, and they know they're running out of time before the Bitcoin craze is all over. They'd like to make some money before that happens.
For others reading here and in case curious, the hedge fund I was working at wasn't interested in paying for access to tracking of activist short campaign data for the short trade ideas themselves. There is little interest in copying or jumping onto another's trade like that. The real interest the hedge fund wants to get alerts and track these campaigns was to keep an eye on what other hedge funds are doing - it was more about competitor and industry colleague research than securities research.