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December 6, 2017 | Bitcoin Mania’s ‘Secret Sauce’

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

For better or worse, bitcoin has everyone’s attention. Anyone even remotely aware of the cryptocurrency’s increasingly wild price swings would recognize a full-blown mania, just as those on the periphery of the Dutch tulip bulb craze of 1636-37 must have known that it would end badly. For now, however, bitcoin has been a big winner for virtually everyone who bought before Monday and held onto it. But it is attracting a growing following of speculators who think they can do even better by trading the swings. When the CBOE and CME unleash their respective bitcoin futures contracts over the next two weeks, it is likely to reduce intraday volatility, at least initially. But watch out if the mania lasts long enough for bitcoin option markets to build up a head of steam. Premium levels for bitcoin puts and calls will be stratospheric, tempting short sellers to get in over their heads. Way over. The Mother of All Short Squeezes is most surely out there, lurking behind a product that paradoxically will settle in cash. Although short sellers won’t have to cough up actual bitcoin, they will still have to cover positions gone dangerously awry whenever bitcoin fever spikes. When that happens, $1500 swings like the one that has occurred this evening will seem as mellow as church bingo.

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December 6th, 2017

Posted In: Rick's Picks

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