$1 Million BTC Options Position Set to Expire on Dec. 28

Former portfolio manager at the University of Chicago endowment and current CIO of Blocktower Capital, Ari Paul, was reported to have made the largest-ever speculative play using BTC options during December of 2017. The contracts, which will expire on Dec. 28, 2018, are almost guaranteed to close as a total loss.

Ari Paul’s Record Options Position Set to Soon Flop

The call options have a strike price of $50,000, meaning that BTC would have to spike by over 1,400 percent in the next two and a half weeks in order for the contracts to retain any value, as they will expire to be worthless should prices fail to sit above $50,000 as of Dec. 28.

The $50,000 calls were purchased for $3,600 each. Twitter-based cryptocurrency commentator Bambouclub recently posted that contracts for $40,000 calls are currently trading for $9.60 on Deribit, estimating that Paul has already eaten a more than 99.73 percent loss.

Should the tides turn in Paul’s favor, the contracts would entitle him to 275 BTC value at $50,000 each, equating to $13.8 million worth of crypto.

Apparently-Doomed Options Position the Largest Taken on Ledgerx

While protecting the identity of the trader who placed the position, Chou described the trade as being indicative of increased institutional demand for cryptocurrency, stating: “Without a doubt, there are institutions out there that are looking at these types of trades or have done these types of trades,” adding that the trader behind the position was “not an individual.”

On Dec. 22, 2017, Business Insider reported that “people familiar with the matter” had revealed that the seven-figure position had been made by Blocktower Capital. The report also cited a tweet posted by Blocktower co-founder Ari Paul, stating “I wonder who bought these?” that was accompanied by a winking smiley and a link to Wall Street Journal’s coverage of the trade.

Options Position Taken to Manage Risk

Paul stated that the position had been taken in the interest of managing the risk of his fund’s portfolio, adding that he “wouldn’t recommend for most people to buy these options.”

“I manage a cryptocurrency portfolio and I’m trying to give investors access to the upside, but I’m also very focused on risk management,” Paul continued. “So these calls are a way for me to capture upside exposure, while actually owning less bitcoin [and] reducing my downside risk.”