BitOption DRAFT

Proposal, for a Distributive Antonymous Corporation (AKA D.A.C.)  

The Idea is to create an run a code that will provide the *role* of a trusted Third Party Option Exchange offering HEDGER and SPECULATOR specific contracts though a programmed Non centralized DAC

 Elimating the need for an exchange, brokerage, clearing house, and escrow

CALL (Bullish) and PUT (models) MODELS (i.e. bullish or bearish hedger/speculator Smart Contracts.

CALL Contract.

person A has 100 units of crypto currency and willing to sell OBLIGATIONS.

person B wants to *Control* 100 worth of crypto currency and willing to purchase RIGHTS

without touching Fiat Cash

Crypto smart contact is formed and person B agrees to out right purchase rights to control a given amount of crypto, in this example 100 crypto coins for 5 percent (+ .001% fee given to DAC)  per given time period

lets say for this example its 30 days.

Person A is willing to give up expansive upside potential in price apperception of the underlying for the *assured* payment of 5 percent ( - .001% fee given to DAC) of the original underlying per time period for a fiat based lock in.

PERSON A sends in 100 worth of crypto currency, PERSON B sends in his 5% (ignoring small fees paid by both the SELLER AND BUYER , to the DACs Wallet.

Person A is considered to be fully Crypto cash secured, Person B has only spent 5 percent.

AT this point the Wallet should show only the best 5 Offers letting the market set the rate, 5 to 10 bids available for every calendar month, creating the option of doing 30, 60 90 ...etc days out. Sorted by Contract Premium rate.

If person B agrees to the terms sends his 5 percent into the DACS wallet to be held on block chain with a price feed stipulating time till expiration and price.

The reason for only showing the top five to ten bids in this case it to make offers competitive and reasonable and thus competitive free market pricing.  (5 or any percent should be determined by willing market particpants.) out side large unrealistic offers or bids should not make the wallet. 

When both parties funds are confirmed on block chain the BitOption Contract is valid... and the time begins.

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If the underlying crypto rises, the escrowed amount gains in notional value, thus any move over persons Bs 5 percent - fee, on the final day of that contract (European Exercise*1) the value of that gain will be paid to person B, buy taking the notional value gained sending to person B, from person As original 100 crypto coins, where the remaining Coins would be sent back to person A in the form of the fixed notional value.

Example using a crypto coin worth one Dollar. (ignoring fees in this example)

person A agreed to getting 105 notional value at contract term end. if the underlying has moved from 1.00 to 1.20 at the contract term end they would receive back 87.5 coins = 105 notionally agreed upon. the remaining 12.5 would be sent to person B the buyer of the right.

that is 12.50 coins minus the 5 percent and fees gain to PERSON B

If the underlying crypto says falls or stays flat. ---- the fee paid by person B is defaulted and sent to person A.

The opposite version of the contract IE PUTS would be the same thing in reverse. Rights and Obligations switched.

where as person B is the participant putting up the cash security 100 percent, and person A is only putting up 5 percent (less fee for DAC both parties. moves down would execute, vs. previous example.

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1 Why European Exorcise* The crypto market is not as liquid or robust at this present moment, and in the future contracts that could be executed buy the owner of the RIGHTS at any time within its life would be ideal, but our current thoughts are that we would currently want to offer an alternative to that pricing model called TPO * which should also address the short comings of any V-WAP volume weighted average price with a large order manipulation the price at contract expiry.  

T.P.O. is Time/ price opportunity if in our given example the crypto said at 1.00 for 99 percent of its contracts life span and then moved 5 dollars one minute till expiry, that move should be discounted relative to the time the product was available at one dollar.  

These products combined with owning long or short crypto currency could act as an advanced hedge for both holders and or speculators of the crypto markets allowing both to decrease the individual holders account volatility, and offer a lower cost to entry way (ie only 5 percent in this example) for crypto currency exposure either direction either long or short.

IF the market became thick and liquid, the goal would be to leave the European settle and move to American, offer many different striking prices and or interest liability levels to buy and or sell Smart Contracts against the underlying, moving to a more robust Fisher black and Myron Sholes Model.

Alignment with Third Friday Options Expiry would also allow current fungibility to already existing financial derivative products. i.e. Options Clearing CORP OIC

Final thought, While the above example is done with a factious one dollar value crypto currency, a notional equivalent attached to any underlying price feed is just as viable i.e. priced in Gold, Oil, Silver or even individual stock, commodity, ETF product, or FX Currency pair. 

 

Thank you

DRAFT