Trading Strategy For Binary Options. Winning Strategies ...

No gods, no kings, only NOPE - or divining the future with options flows. [Part 3: Hedge Winding, Unwinding, and the NOPE]

Hello friends!
We're on the last post of this series ("A Gentle Introduction to NOPE"), where we get to use all the Big Boy Concepts (TM) we've discussed in the prior posts and put them all together. Some words before we begin:
  1. This post will be massively theoretical, in the sense that my own speculation and inferences will be largely peppered throughout the post. Are those speculations right? I think so, or I wouldn't be posting it, but they could also be incorrect.
  2. I will briefly touch on using the NOPE this slide, but I will make a secondary post with much more interesting data and trends I've observed. This is primarily for explaining what NOPE is and why it potentially works, and what it potentially measures.
My advice before reading this is to glance at my prior posts, and either read those fully or at least make sure you understand the tl;drs:
Depending on popular demand, I will also make a last-last post called FAQ, where I'll tabulate interesting questions you guys ask me in the comments!
So a brief recap before we begin.
Market Maker ("Mr. MM"): An individual or firm who makes money off the exchange fees and bid-ask spread for an asset, while usually trying to stay neutral about the direction the asset moves.
Delta-gamma hedging: The process Mr. MM uses to stay neutral when selling you shitty OTM options, by buying/selling shares (usually) of the underlying as the price moves.
Law of Surprise [Lily-ism]: Effectively, the expected profit of an options trade is zero for both the seller and the buyer.
Random Walk: A special case of a deeper probability probability called a martingale, which basically models stocks or similar phenomena randomly moving every step they take (for stocks, roughly every millisecond). This is one of the most popular views of how stock prices move, especially on short timescales.
Future Expected Payoff Function [Lily-ism]: This is some hidden function that every market participant has about an asset, which more or less models all the possible future probabilities/values of the assets to arrive at a "fair market price". This is a more generalized case of a pricing model like Black-Scholes, or DCF.
Counter-party: The opposite side of your trade (if you sell an option, they buy it; if you buy an option, they sell it).
Price decoherence ]Lily-ism]: A more generalized notion of IV Crush, price decoherence happens when instead of the FEPF changing gradually over time (price formation), the FEPF rapidly changes, due usually to new information being added to the system (e.g. Vermin Supreme winning the 2020 election).
One of the most popular gambling events for option traders to play is earnings announcements, and I do owe the concept of NOPE to hypothesizing specifically about the behavior of stock prices at earnings. Much like a black hole in quantum mechanics, most conventional theories about how price should work rapidly break down briefly before, during, and after ER, and generally experienced traders tend to shy away from playing earnings, given their similar unpredictability.
Before we start: what is NOPE? NOPE is a funny backronym from Net Options Pricing Effect, which in its most basic sense, measures the impact option delta has on the underlying price, as compared to share price. When I first started investigating NOPE, I called it OPE (options pricing effect), but NOPE sounds funnier.
The formula for it is dead simple, but I also have no idea how to do LaTeX on reddit, so this is the best I have:
Since I've already encountered this, put delta in this case is the absolute value (50 delta) to represent a put. If you represent put delta as a negative (the conventional way), do not subtract it; add it.
To keep this simple for the non-mathematically minded: the NOPE today is equal to the weighted sum (weighted by volume) of the delta of every call minus the delta of every put for all options chains extending from today to infinity. Finally, we then divide that number by the # of shares traded today in the market session (ignoring pre-market and post-market, since options cannot trade during those times).
Effectively, NOPE is a rough and dirty way to approximate the impact of delta-gamma hedging as a function of share volume, with us hand-waving the following factors:
  1. To keep calculations simple, we assume that all counter-parties are hedged. This is obviously not true, especially for idiots who believe theta ganging is safe, but holds largely true especially for highly liquid tickers, or tickers will designated market makers (e.g. any ticker in the NASDAQ, for instance).
  2. We assume that all hedging takes place via shares. For SPY and other products tracking the S&P, for instance, market makers can actually hedge via futures or other options. This has the benefit for large positions of not moving the underlying price, but still makes up a fairly small amount of hedges compared to shares.

Winding and Unwinding

I briefly touched on this in a past post, but two properties of NOPE seem to apply well to EER-like behavior (aka any binary catalyst event):
  1. NOPE measures sentiment - In general, the options market is seen as better informed than share traders (e.g. insiders trade via options, because of leverage + easier to mask positions). Therefore, a heavy call/put skew is usually seen as a bullish sign, while the reverse is also true.
  2. NOPE measures system stability
I'm not going to one-sentence explain #2, because why say in one sentence what I can write 1000 words on. In short, NOPE intends to measure sensitivity of the system (the ticker) to disruption. This makes sense, when you view it in the context of delta-gamma hedging. When we assume all counter-parties are hedged, this means an absolutely massive amount of shares get sold/purchased when the underlying price moves. This is because of the following:
a) Assume I, Mr. MM sell 1000 call options for NKLA 25C 10/23 and 300 put options for NKLA 15p 10/23. I'm just going to make up deltas because it's too much effort to calculate them - 30 delta call, 20 delta put.
This implies Mr. MM needs the following to delta hedge: (1000 call options * 30 shares to buy for each) [to balance out writing calls) - (300 put options * 20 shares to sell for each) = 24,000 net shares Mr. MM needs to acquire to balance out his deltas/be fully neutral.
b) This works well when NKLA is at $20. But what about when it hits $19 (because it only can go down, just like their trucks). Thanks to gamma, now we have to recompute the deltas, because they've changed for both the calls (they went down) and for the puts (they went up).
Let's say to keep it simple that now my calls are 20 delta, and my puts are 30 delta. From the 24,000 net shares, Mr. MM has to now have:
(1000 call options * 20 shares to have for each) - (300 put options * 30 shares to sell for each) = 11,000 shares.
Therefore, with a $1 shift in price, now to hedge and be indifferent to direction, Mr. MM has to go from 24,000 shares to 11,000 shares, meaning he has to sell 13,000 shares ASAP, or take on increased risk. Now, you might be saying, "13,000 shares seems small. How would this disrupt the system?"
(This process, by the way, is called hedge unwinding)
It won't, in this example. But across thousands of MMs and millions of contracts, this can - especially in highly optioned tickers - make up a substantial fraction of the net flow of shares per day. And as we know from our desk example, the buying or selling of shares directly changes the price of the stock itself.
This, by the way, is why the NOPE formula takes the shape it does. Some astute readers might notice it looks similar to GEX, which is not a coincidence. GEX however replaces daily volume with open interest, and measures gamma over delta, which I did not find good statistical evidence to support, especially for earnings.
So, with our example above, why does NOPE measure system stability? We can assume for argument's sake that if someone buys a share of NKLA, they're fine with moderate price swings (+- $20 since it's NKLA, obviously), and in it for the long/medium haul. And in most cases this is fine - we can own stock and not worry about minor swings in price. But market makers can't* (they can, but it exposes them to risk), because of how delta works. In fact, for most institutional market makers, they have clearly defined delta limits by end of day, and even small price changes require them to rebalance their hedges.
This over the whole market adds up to a lot shares moving, just to balance out your stupid Robinhood YOLOs. While there are some tricks (dark pools, block trades) to not impact the price of the underlying, the reality is that the more options contracts there are on a ticker, the more outsized influence it will have on the ticker's price. This can technically be exactly balanced, if option put delta is equal to option call delta, but never actually ends up being the case. And unlike shares traded, the shares representing the options are more unstable, meaning they will be sold/bought in response to small price shifts. And will end up magnifying those price shifts, accordingly.

NOPE and Earnings

So we have a new shiny indicator, NOPE. What does it actually mean and do?
There's much literature going back to the 1980s that options markets do have some level of predictiveness towards earnings, which makes sense intuitively. Unlike shares markets, where you can continue to hold your share even if it dips 5%, in options you get access to expanded opportunity to make riches... and losses. An options trader betting on earnings is making a risky and therefore informed bet that he or she knows the outcome, versus a share trader who might be comfortable bagholding in the worst case scenario.
As I've mentioned largely in comments on my prior posts, earnings is a special case because, unlike popular misconceptions, stocks do not go up and down solely due to analyst expectations being meet, beat, or missed. In fact, stock prices move according to the consensus market expectation, which is a function of all the participants' FEPF on that ticker. This is why the price moves so dramatically - even if a stock beats, it might not beat enough to justify the high price tag (FSLY); even if a stock misses, it might have spectacular guidance or maybe the market just was assuming it would go bankrupt instead.
To look at the impact of NOPE and why it may play a role in post-earnings-announcement immediate price moves, let's review the following cases:
  1. Stock Meets/Exceeds Market Expectations (aka price goes up) - In the general case, we would anticipate post-ER market participants value the stock at a higher price, pushing it up rapidly. If there's a high absolute value of NOPE on said ticker, this should end up magnifying the positive move since:
a) If NOPE is high negative - This means a ton of put buying, which means a lot of those puts are now worthless (due to price decoherence). This means that to stay delta neutral, market makers need to close out their sold/shorted shares, buying them, and pushing the stock price up.
b) If NOPE is high positive - This means a ton of call buying, which means a lot of puts are now worthless (see a) but also a lot of calls are now worth more. This means that to stay delta neutral, market makers need to close out their sold/shorted shares AND also buy more shares to cover their calls, pushing the stock price up.
2) Stock Meets/Misses Market Expectations (aka price goes down) - Inversely to what I mentioned above, this should push to the stock price down, fairly immediately. If there's a high absolute value of NOPE on said ticker, this should end up magnifying the negative move since:
a) If NOPE is high negative - This means a ton of put buying, which means a lot of those puts are now worth more, and a lot of calls are now worth less/worth less (due to price decoherence). This means that to stay delta neutral, market makers need to sell/short more shares, pushing the stock price down.
b) If NOPE is high positive - This means a ton of call buying, which means a lot of calls are now worthless (see a) but also a lot of puts are now worth more. This means that to stay delta neutral, market makers need to sell even more shares to keep their calls and puts neutral, pushing the stock price down.
Based on the above two cases, it should be a bit more clear why NOPE is a measure of sensitivity to system perturbation. While we previously discussed it in the context of magnifying directional move, the truth is it also provides a directional bias to our "random" walk. This is because given a price move in the direction predicted by NOPE, we expect it to be magnified, especially in situations of price decoherence. If a stock price goes up right after an ER report drops, even based on one participant deciding to value the stock higher, this provides a runaway reaction which boosts the stock price (due to hedging factors as well as other participants' behavior) and inures it to drops.


I'm going to gloss over this section because this is more statistical methods than anything interesting. In general, if you have enough data, I recommend using NOPE_MAD over NOPE. While NOPE in theory represents a "real" quantity (net option delta over net share delta), NOPE_MAD (the median absolute deviation of NOPE) does not. NOPE_MAD simply answecompare the following:
  1. How exceptional is today's NOPE versus historic baseline (30 days prior)?
  2. How do I compare two tickers' NOPEs effectively (since some tickers, like TSLA, have a baseline positive NOPE, because Elon memes)? In the initial stages, we used just a straight numerical threshold (let's say NOPE >= 20), but that quickly broke down. NOPE_MAD aims to detect anomalies, because anomalies in general give you tendies.
I might add the formula later in Mathenese, but simply put, to find NOPE_MAD you do the following:
  1. Calculate today's NOPE score (this can be done end of day or intraday, with the true value being EOD of course)
  2. Calculate the end of day NOPE scores on the ticker for the previous 30 trading days
  3. Compute the median of the previous 30 trading days' NOPEs
  4. From the median, find the 30 days' median absolute deviation (
  5. Find today's deviation as compared to the MAD calculated by: [(today's NOPE) - (median NOPE of last 30 days)] / (median absolute deviation of last 30 days)
This is usually reported as sigma (σ), and has a few interesting properties:
  1. The mean of NOPE_MAD for any ticker is almost exactly 0.
  2. [Lily's Speculation's Speculation] NOPE_MAD acts like a spring, and has a tendency to reverse direction as a function of its magnitude. No proof on this yet, but exploring it!

Using the NOPE to predict ER

So the last section was a lot of words and theory, and a lot of what I'm mentioning here is empirically derived (aka I've tested it out, versus just blabbered).
In general, the following holds true:
  1. 3 sigma NOPE_MAD tends to be "the threshold": For very low NOPE_MAD magnitudes (+- 1 sigma), it's effectively just noise, and directionality prediction is low, if not non-existent. It's not exactly like 3 sigma is a play and 2.9 sigma is not a play; NOPE_MAD accuracy increases as NOPE_MAD magnitude (either positive or negative) increases.
  2. NOPE_MAD is only useful on highly optioned tickers: In general, I introduce another parameter for sifting through "candidate" ERs to play: option volume * 100/share volume. When this ends up over let's say 0.4, NOPE_MAD provides a fairly good window into predicting earnings behavior.
  3. NOPE_MAD only predicts during the after-market/pre-market session: I also have no idea if this is true, but my hunch is that next day behavior is mostly random and driven by market movement versus earnings behavior. NOPE_MAD for now only predicts direction of price movements right between the release of the ER report (AH or PM) and the ending of that market session. This is why in general I recommend playing shares, not options for ER (since you can sell during the AH/PM).
  4. NOPE_MAD only predicts direction of price movement: This isn't exactly true, but it's all I feel comfortable stating given the data I have. On observation of ~2700 data points of ER-ticker events since Mar 2019 (SPY 500), I only so far feel comfortable predicting whether stock price goes up (>0 percent difference) or down (<0 price difference). This is +1 for why I usually play with shares.
Some statistics:
#0) As a baseline/null hypothesis, after ER on the SPY500 since Mar 2019, 50-51% price movements in the AH/PM are positive (>0) and ~46-47% are negative (<0).
#1) For NOPE_MAD >= +3 sigma, roughly 68% of price movements are positive after earnings.
#2) For NOPE_MAD <= -3 sigma, roughly 29% of price movements are positive after earnings.
#3) When using a logistic model of only data including NOPE_MAD >= +3 sigma or NOPE_MAD <= -3 sigma, and option/share vol >= 0.4 (around 25% of all ERs observed), I was able to achieve 78% predictive accuracy on direction.

Caveats/Read This

Like all models, NOPE is wrong, but perhaps useful. It's also fairly new (I started working on it around early August 2020), and in fact, my initial hypothesis was exactly incorrect (I thought the opposite would happen, actually). Similarly, as commenters have pointed out, the timeline of data I'm using is fairly compressed (since Mar 2019), and trends and models do change. In fact, I've noticed significantly lower accuracy since the coronavirus recession (when I measured it in early September), but I attribute this mostly to a smaller date range, more market volatility, and honestly, dumber option traders (~65% accuracy versus nearly 80%).
My advice so far if you do play ER with the NOPE method is to use it as following:
  1. Buy/short shares approximately right when the market closes before ER. Ideally even buying it right before the earnings report drops in the AH session is not a bad idea if you can.
  2. Sell/buy to close said shares at the first sign of major weakness (e.g. if the NOPE predicted outcome is incorrect).
  3. Sell/buy to close shares even if it is correct ideally before conference call, or by the end of the after-market/pre-market session.
  4. Only play tickers with high NOPE as well as high option/share vol.
In my next post, which may be in a few days, I'll talk about potential use cases for SPY and intraday trends, but I wanted to make sure this wasn't like 7000 words by itself.
- Lily
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The classic WSB story - lost it all.

Going to keep this simple. EDIT: this isn’t simple and I should write a short story on this.
I am generally risk averse. I hate losing $100 at the casino, I hate paying extra for guac at chipotles, I will return something or price match an item for a few dollars of savings. I am generally frugal.
But, I somehow had no issues losing 10k in options...
How I started
I remember my first trades like they were yesterday. I was trading the first hydrogen run-up in 2014 (FCEL, BLDP, PLUG) and made a few hundred dollars over a couple weeks.
I quickly progressed to penny stocks / biotech binary events and general stock market gambling mid-2014. I was making a few % here and there but the trend was down in total account value. I was the king of buying the peak in run-ups. I managed to make it out of 2014 close to break-even to slightly down.
March 2015 was my first option trade. It was an AXP - American Express - monthly option trade. I saw one of the regular option traders/services post a block of 10,000 calls that had been bought for 1.3 and I followed the trade with 10 call options for a total of $1300.
I woke up the next day to an analyst upgrade on AXP and was up 50% on my position. I was addicted! I day-dreamed for days about my AXP over night success. I think around that time there was some sort of Buffet buyout of Heinz and an option trade that was up a ridiculous amount of %%%. I wanted to hit it BIG.
I came up with the idea that all I needed to reach my goal was a few 100% over night gains/ 1k>2k>4k>8k> etc. I convinced myself that I would have no problems being patient for the exact criteria that I had set and worked on some other trades.
Remember, the first win is always free.
I was trading options pretty regularly from March 2015 until August 2016. During my best week I was up 20k and could feel the milli within reach. I can remember the exact option trade (HTZ) and I was trading weeklies on it.
For those who have been in the market long enough, you will remember the huge drawdown of August 2015.
I lost half my account value on QCOM calls (100 of them) that I followed at the beginning of July and never materialized. I watched them eventually go to 0. It was another 10,000 block that was probably a hedge or sold.
In August 2015 there were some issues with China and all of us woke up to stocks gapping down huge. Unfortunately my idea of buying far dated calls during the following days/weeks after the crash went sideways. I quickly learned that an increase in volatility causes a rise in option prices and I was paying a premium for calls that were going to lose value very quickly (the infamous IV crush).
I kept trading options into the end of 2015 and managed to maintain my account value positive but the trading fees for the year amounted to $30,000+. My broker was loving it.
I tried all the services, all the strategies. I created rules for my option plays: 1. No earnings 2. Only follow the big buys at a discount (10,000 blocks or more). 3. No weekly options 4. Take profit right away 5. Take losses quickly 6. etc.
I had a whole note book of option plays that I was writing down and following. I was paying for option services that all of you know about - remember, they make money on the services and not trading.
I even figured out a loop-hole with my broker: if I didn’t have enough money in my account, I could change my ask price to .01 and then change it to market buy and I would only need to accept a warning ⚠️ for the order to go through. I was able to day trade the option and make money, who cares if I didnt have enough? After a few months of this, I got a call from my broker that told me to stop and that I would be suspended if I continued with this.
By the way, I was always able to satisfy the debit on the account - so it wasn’t an issue of lack of funds.
Lost it all. Started taking money from lines of credits, every penny that I earned and losing it quicker and quicker.
I was a full on gambler but I was convinced that 8 trades would offset all the losses. I kept getting drawn in to the idea that I could hit a homerun and make it out a hero.
I eventually hit rock bottom on some weekly expiring FSLR options that I bought hours before expiration and said to myself - what the f are you doing? I resolved to invest for the long term and stop throwing tendies away.
The feeling was reinforced during the birth of my first born and I thought - what a loser this kid will think of me if he knew how much I was gambling and wasting my life. It was a really powerful moment looking at my kid and reflecting on this idea.
I decided at that point I was going to save every penny I had and invest it on new issues with potential.
Fall 2016
TTD, COUP and NTNX IPO ‘ed I decided I was going to throw every dollar at these and did so for the next few months. I eventually started using margin (up to 215%) and buying these for the next 6 months. They paid out and managed to make it over 100k within the year.
The first 100k was hard but once I crossed it, I never fell below this magic number.
2017 - I did some day trading but it was mostly obsessing over the above issues. I did gamble on a few options here and there but never more than 1k.
2018 - SFIX was my big winner, I bought a gap up in June 2018 and my combined account value had crossed 400k by August 2018. I was really struggling at crossing the 500k account value and experienced 3 x 30-40% drawdowns over the next 2 years before I finally crossed the 500k barrier and have never looked back.
I still made some mistakes over the next few months - AKAO & GSUM come to mind. Both of these resulted in 20k+ losses. Fortunately my winners were much bigger than my losers.
I thought about giving up and moving to index funds - but i was doing well - just experiencing large drawdowns because of leverage.
2019 big winners were CRON SWAV STNE.
2017 / 2018 / 2019 all had six digit capital gains on my tax returns.
At the beginning of 2020 I was still day trading on margin (180-220%) and got a call from my broker that they were tightening up my margin as my account was analyzed by the risk department and deemed too risky. Believe it or not this was right before the covid crash. I brought my margin down to 100-110% of account value and even though the drawdown from covid hit hard, I wasn’t wiped out.
I stayed the course and bought FSLY / RH during the big march drawdown and this resulted in some nice gains over the next few months.
I am constantly changing and testing my investment strategy but let me tell you that obsessing over 1 or 2 ideas and throwing every penny at it and holding for a few years is the best strategy. It may not work at some point but right now it does.
I still day trade but I trade with 10k or less on each individual position. It allows me minimize my losses and my winners are 1-7%. I am able to consistently make between 3-700$/ a day on day trades using the above strategy. I still take losses and still dream about hitting it big with an option trade but dont feel the need to put it all on the line every month / week.
I finally crossed into the two , club. I know people are going to ask for proof or ban but I am not earning anything for posting and the details about some of the trades should be proof enough that I kept a detailed journal of it all. I have way more to write but these are the highlights.
Eventually I will share how I build a position in a story I love. I still sell buy and sell to early but I am working on improving.
TL:DR - I gambled, lost it all and gambled some more lost more. I made it out alive. I have only sold calls/puts lately.
The one common denominator in all successful people is how much they obsess over 1 or 2 ideas. Do the same. All the winners on this sub have gone all in on one idea (FSLY / TSLA ). Stick with new stories or ones that are changing and go all in...wait a second, I didnt learn anything.
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Everything You Always Wanted To Know About Swaps* (*But Were Afraid To Ask)

Hello, dummies
It's your old pal, Fuzzy.
As I'm sure you've all noticed, a lot of the stuff that gets posted here is - to put it delicately - fucking ridiculous. More backwards-ass shit gets posted to wallstreetbets than you'd see on a Westboro Baptist community message board. I mean, I had a look at the daily thread yesterday and..... yeesh. I know, I know. We all make like the divine Laura Dern circa 1992 on the daily and stick our hands deep into this steaming heap of shit to find the nuggets of valuable and/or hilarious information within (thanks for reading, BTW). I agree. I love it just the way it is too. That's what makes WSB great.
What I'm getting at is that a lot of the stuff that gets posted here - notwithstanding it being funny or interesting - is just... wrong. Like, fucking your cousin wrong. And to be clear, I mean the fucking your *first* cousin kinda wrong, before my Southerners in the back get all het up (simmer down, Billy Ray - I know Mabel's twice removed on your grand-sister's side). Truly, I try to let it slide. I do my bit to try and put you on the right path. Most of the time, I sleep easy no matter how badly I've seen someone explain what a bank liquidity crisis is. But out of all of those tens of thousands of misguided, autistic attempts at understanding the world of high finance, one thing gets so consistently - so *emphatically* - fucked up and misunderstood by you retards that last night I felt obligated at the end of a long work day to pull together this edition of Finance with Fuzzy just for you. It's so serious I'm not even going to make a u/pokimane gag. Have you guessed what it is yet? Here's a clue. It's in the title of the post.
That's right, friends. Today in the neighborhood we're going to talk all about hedging in financial markets - spots, swaps, collars, forwards, CDS, synthetic CDOs, all that fun shit. Don't worry; I'm going to explain what all the scary words mean and how they impact your OTM RH positions along the way.
We're going to break it down like this. (1) "What's a hedge, Fuzzy?" (2) Common Hedging Strategies and (3) All About ISDAs and Credit Default Swaps.
Before we begin. For the nerds and JV traders in the back (and anyone else who needs to hear this up front) - I am simplifying these descriptions for the purposes of this post. I am also obviously not going to try and cover every exotic form of hedge under the sun or give a detailed summation of what caused the financial crisis. If you are interested in something specific ask a question, but don't try and impress me with your Investopedia skills or technical points I didn't cover; I will just be forced to flex my years of IRL experience on you in the comments and you'll look like a big dummy.
TL;DR? Fuck you. There is no TL;DR. You've come this far already. What's a few more paragraphs? Put down the Cheetos and try to concentrate for the next 5-7 minutes. You'll learn something, and I promise I'll be gentle.
Ready? Let's get started.
1. The Tao of Risk: Hedging as a Way of Life
The simplest way to characterize what a hedge 'is' is to imagine every action having a binary outcome. One is bad, one is good. Red lines, green lines; uppie, downie. With me so far? Good. A 'hedge' is simply the employment of a strategy to mitigate the effect of your action having the wrong binary outcome. You wanted X, but you got Z! Frowny face. A hedge strategy introduces a third outcome. If you hedged against the possibility of Z happening, then you can wind up with Y instead. Not as good as X, but not as bad as Z. The technical definition I like to give my idiot juniors is as follows:
Utilization of a defensive strategy to mitigate risk, at a fraction of the cost to capital of the risk itself.
Congratulations. You just finished Hedging 101. "But Fuzzy, that's easy! I just sold a naked call against my 95% OTM put! I'm adequately hedged!". Spoiler alert: you're not (although good work on executing a collar, which I describe below). What I'm talking about here is what would be referred to as a 'perfect hedge'; a binary outcome where downside is totally mitigated by a risk management strategy. That's not how it works IRL. Pay attention; this is the tricky part.
You can't take a single position and conclude that you're adequately hedged because risks are fluid, not static. So you need to constantly adjust your position in order to maximize the value of the hedge and insure your position. You also need to consider exposure to more than one category of risk. There are micro (specific exposure) risks, and macro (trend exposure) risks, and both need to factor into the hedge calculus.
That's why, in the real world, the value of hedging depends entirely on the design of the hedging strategy itself. Here, when we say "value" of the hedge, we're not talking about cash money - we're talking about the intrinsic value of the hedge relative to the the risk profile of your underlying exposure. To achieve this, people hedge dynamically. In wallstreetbets terms, this means that as the value of your position changes, you need to change your hedges too. The idea is to efficiently and continuously distribute and rebalance risk across different states and periods, taking value from states in which the marginal cost of the hedge is low and putting it back into states where marginal cost of the hedge is high, until the shadow value of your underlying exposure is equalized across your positions. The punchline, I guess, is that one static position is a hedge in the same way that the finger paintings you make for your wife's boyfriend are art - it's technically correct, but you're only playing yourself by believing it.
Anyway. Obviously doing this as a small potatoes trader is hard but it's worth taking into account. Enough basic shit. So how does this work in markets?
2. A Hedging Taxonomy
The best place to start here is a practical question. What does a business need to hedge against? Think about the specific risk that an individual business faces. These are legion, so I'm just going to list a few of the key ones that apply to most corporates. (1) You have commodity risk for the shit you buy or the shit you use. (2) You have currency risk for the money you borrow. (3) You have rate risk on the debt you carry. (4) You have offtake risk for the shit you sell. Complicated, right? To help address the many and varied ways that shit can go wrong in a sophisticated market, smart operators like yours truly have devised a whole bundle of different instruments which can help you manage the risk. I might write about some of the more complicated ones in a later post if people are interested (CDO/CLOs, strip/stack hedges and bond swaps with option toggles come to mind) but let's stick to the basics for now.
(i) Swaps
A swap is one of the most common forms of hedge instrument, and they're used by pretty much everyone that can afford them. The language is complicated but the concept isn't, so pay attention and you'll be fine. This is the most important part of this section so it'll be the longest one.
Swaps are derivative contracts with two counterparties (before you ask, you can't trade 'em on an exchange - they're OTC instruments only). They're used to exchange one cash flow for another cash flow of equal expected value; doing this allows you to take speculative positions on certain financial prices or to alter the cash flows of existing assets or liabilities within a business. "Wait, Fuzz; slow down! What do you mean sets of cash flows?". Fear not, little autist. Ol' Fuzz has you covered.
The cash flows I'm talking about are referred to in swap-land as 'legs'. One leg is fixed - a set payment that's the same every time it gets paid - and the other is variable - it fluctuates (typically indexed off the price of the underlying risk that you are speculating on / protecting against). You set it up at the start so that they're notionally equal and the two legs net off; so at open, the swap is a zero NPV instrument. Here's where the fun starts. If the price that you based the variable leg of the swap on changes, the value of the swap will shift; the party on the wrong side of the move ponies up via the variable payment. It's a zero sum game.
I'll give you an example using the most vanilla swap around; an interest rate trade. Here's how it works. You borrow money from a bank, and they charge you a rate of interest. You lock the rate up front, because you're smart like that. But then - quelle surprise! - the rate gets better after you borrow. Now you're bagholding to the tune of, I don't know, 5 bps. Doesn't sound like much but on a billion dollar loan that's a lot of money (a classic example of the kind of 'small, deep hole' that's terrible for profits). Now, if you had a swap contract on the rate before you entered the trade, you're set; if the rate goes down, you get a payment under the swap. If it goes up, whatever payment you're making to the bank is netted off by the fact that you're borrowing at a sub-market rate. Win-win! Or, at least, Lose Less / Lose Less. That's the name of the game in hedging.
There are many different kinds of swaps, some of which are pretty exotic; but they're all different variations on the same theme. If your business has exposure to something which fluctuates in price, you trade swaps to hedge against the fluctuation. The valuation of swaps is also super interesting but I guarantee you that 99% of you won't understand it so I'm not going to try and explain it here although I encourage you to google it if you're interested.
Because they're OTC, none of them are filed publicly. Someeeeeetimes you see an ISDA (dsicussed below) but the confirms themselves (the individual swaps) are not filed. You can usually read about the hedging strategy in a 10-K, though. For what it's worth, most modern credit agreements ban speculative hedging. Top tip: This is occasionally something worth checking in credit agreements when you invest in businesses that are debt issuers - being able to do this increases the risk profile significantly and is particularly important in times of economic volatility (ctrl+f "non-speculative" in the credit agreement to be sure).
(ii) Forwards
A forward is a contract made today for the future delivery of an asset at a pre-agreed price. That's it. "But Fuzzy! That sounds just like a futures contract!". I know. Confusing, right? Just like a futures trade, forwards are generally used in commodity or forex land to protect against price fluctuations. The differences between forwards and futures are small but significant. I'm not going to go into super boring detail because I don't think many of you are commodities traders but it is still an important thing to understand even if you're just an RH jockey, so stick with me.
Just like swaps, forwards are OTC contracts - they're not publicly traded. This is distinct from futures, which are traded on exchanges (see The Ballad Of Big Dick Vick for some more color on this). In a forward, no money changes hands until the maturity date of the contract when delivery and receipt are carried out; price and quantity are locked in from day 1. As you now know having read about BDV, futures are marked to market daily, and normally people close them out with synthetic settlement using an inverse position. They're also liquid, and that makes them easier to unwind or close out in case shit goes sideways.
People use forwards when they absolutely have to get rid of the thing they made (or take delivery of the thing they need). If you're a miner, or a farmer, you use this shit to make sure that at the end of the production cycle, you can get rid of the shit you made (and you won't get fucked by someone taking cash settlement over delivery). If you're a buyer, you use them to guarantee that you'll get whatever the shit is that you'll need at a price agreed in advance. Because they're OTC, you can also exactly tailor them to the requirements of your particular circumstances.
These contracts are incredibly byzantine (and there are even crazier synthetic forwards you can see in money markets for the true degenerate fund managers). In my experience, only Texan oilfield magnates, commodities traders, and the weirdo forex crowd fuck with them. I (i) do not own a 10 gallon hat or a novelty size belt buckle (ii) do not wake up in the middle of the night freaking out about the price of pork fat and (iii) love greenbacks too much to care about other countries' monopoly money, so I don't fuck with them.
(iii) Collars
No, not the kind your wife is encouraging you to wear try out to 'spice things up' in the bedroom during quarantine. Collars are actually the hedging strategy most applicable to WSB. Collars deal with options! Hooray!
To execute a basic collar (also called a wrapper by tea-drinking Brits and people from the Antipodes), you buy an out of the money put while simultaneously writing a covered call on the same equity. The put protects your position against price drops and writing the call produces income that offsets the put premium. Doing this limits your tendies (you can only profit up to the strike price of the call) but also writes down your risk. If you screen large volume trades with a VOL/OI of more than 3 or 4x (and they're not bullshit biotech stocks), you can sometimes see these being constructed in real time as hedge funds protect themselves on their shorts.
(3) All About ISDAs, CDS and Synthetic CDOs
You may have heard about the mythical ISDA. Much like an indenture (discussed in my post on $F), it's a magic legal machine that lets you build swaps via trade confirms with a willing counterparty. They are very complicated legal documents and you need to be a true expert to fuck with them. Fortunately, I am, so I do. They're made of two parts; a Master (which is a form agreement that's always the same) and a Schedule (which amends the Master to include your specific terms). They are also the engine behind just about every major credit crunch of the last 10+ years.
First - a brief explainer. An ISDA is a not in and of itself a hedge - it's an umbrella contract that governs the terms of your swaps, which you use to construct your hedge position. You can trade commodities, forex, rates, whatever, all under the same ISDA.
Let me explain. Remember when we talked about swaps? Right. So. You can trade swaps on just about anything. In the late 90s and early 2000s, people had the smart idea of using other people's debt and or credit ratings as the variable leg of swap documentation. These are called credit default swaps. I was actually starting out at a bank during this time and, I gotta tell you, the only thing I can compare people's enthusiasm for this shit to was that moment in your early teens when you discover jerking off. Except, unlike your bathroom bound shame sessions to Mom's Sears catalogue, every single person you know felt that way too; and they're all doing it at once. It was a fiscal circlejerk of epic proportions, and the financial crisis was the inevitable bukkake finish. WSB autism is absolutely no comparison for the enthusiasm people had during this time for lighting each other's money on fire.
Here's how it works. You pick a company. Any company. Maybe even your own! And then you write a swap. In the swap, you define "Credit Event" with respect to that company's debt as the variable leg . And you write in... whatever you want. A ratings downgrade, default under the docs, failure to meet a leverage ratio or FCCR for a certain testing period... whatever. Now, this started out as a hedge position, just like we discussed above. The purest of intentions, of course. But then people realized - if bad shit happens, you make money. And banks... don't like calling in loans or forcing bankruptcies. Can you smell what the moral hazard is cooking?
Enter synthetic CDOs. CDOs are basically pools of asset backed securities that invest in debt (loans or bonds). They've been around for a minute but they got famous in the 2000s because a shitload of them containing subprime mortgage debt went belly up in 2008. This got a lot of publicity because a lot of sad looking rednecks got foreclosed on and were interviewed on CNBC. "OH!", the people cried. "Look at those big bad bankers buying up subprime loans! They caused this!". Wrong answer, America. The debt wasn't the problem. What a lot of people don't realize is that the real meat of the problem was not in regular way CDOs investing in bundles of shit mortgage debts in synthetic CDOs investing in CDS predicated on that debt. They're synthetic because they don't have a stake in the actual underlying debt; just the instruments riding on the coattails. The reason these are so popular (and remain so) is that smart structured attorneys and bankers like your faithful correspondent realized that an even more profitable and efficient way of building high yield products with limited downside was investing in instruments that profit from failure of debt and in instruments that rely on that debt and then hedging that exposure with other CDS instruments in paired trades, and on and on up the chain. The problem with doing this was that everyone wound up exposed to everybody else's books as a result, and when one went tits up, everybody did. Hence, recession, Basel III, etc. Thanks, Obama.
Heavy investment in CDS can also have a warping effect on the price of debt (something else that happened during the pre-financial crisis years and is starting to happen again now). This happens in three different ways. (1) Investors who previously were long on the debt hedge their position by selling CDS protection on the underlying, putting downward pressure on the debt price. (2) Investors who previously shorted the debt switch to buying CDS protection because the relatively illiquid debt (partic. when its a bond) trades at a discount below par compared to the CDS. The resulting reduction in short selling puts upward pressure on the bond price. (3) The delta in price and actual value of the debt tempts some investors to become NBTs (neg basis traders) who long the debt and purchase CDS protection. If traders can't take leverage, nothing happens to the price of the debt. If basis traders can take leverage (which is nearly always the case because they're holding a hedged position), they can push up or depress the debt price, goosing swap premiums etc. Anyway. Enough technical details.
I could keep going. This is a fascinating topic that is very poorly understood and explained, mainly because the people that caused it all still work on the street and use the same tactics today (it's also terribly taught at business schools because none of the teachers were actually around to see how this played out live). But it relates to the topic of today's lesson, so I thought I'd include it here.
Work depending, I'll be back next week with a covenant breakdown. Most upvoted ticker gets the post.
*EDIT 1\* In a total blowout, $PLAY won. So it's D&B time next week. Post will drop Monday at market open.
submitted by fuzzyblankeet to wallstreetbets [link] [comments]

2 months back at trading (update) and some new questions

Hi all, I posted a thread back a few months ago when I started getting seriously back into trading after 20 years away. I thought I'd post an update with some notes on how I'm progressing. I like to type, so settle in. Maybe it'll help new traders who are exactly where I was 2 months ago, I dunno. Or maybe you'll wonder why you spent 3 minutes reading this. Risk/reward, yo.
I'm trading 5k on TastyWorks. I'm a newcomer to theta positive strategies and have done about two thirds of my overall trades in this style. However, most of my experience in trading in the past has been intraday timeframe oriented chart reading and momentum stuff. I learned almost everything "new" that I'm doing from TastyTrade, /options, /thetagang, and Option Alpha. I've enjoyed the material coming from esinvests YouTube channel quite a bit as well. The theta gang type strategies I've done have been almost entirely around binary event IV contraction (mostly earnings, but not always) and in most cases, capped to about $250 in risk per position.
The raw numbers:
Net PnL : +247
Commissions paid: -155
Fees: -42
Right away what jumps out is something that was indicated by realdeal43 and PapaCharlie9 in my previous thread. This is a tough, grindy way to trade a small account. It reminds me a little bit of when I was rising through the stakes in online poker, playing $2/4 limit holdem. Even if you're a profitable player in that game, beating the rake over the long term is very, very hard. Here, over 3 months of trading a conservative style with mostly defined risk strategies, my commissions are roughly equal to my net PnL. That is just insane, and I don't even think I've been overtrading.
55 trades total, win rate of 60%
22 neutral / other trades
Biggest wins:
Biggest losses:
This is pretty much where I expected to be while learning a bunch of new trading techniques. And no, this is not a large sample size so I have no idea whether or not I can be profitable trading this way (yet). I am heartened by the fact that I seem to be hitting my earnings trades and selling quick spikes in IV (like weed cures Corona day). I'm disheartened that I've went against my principles several times, holding trades for longer than I originally intended, or letting losses mount, believing that I could roll or manage my way out of trouble.
I still feel like I am going against my nature to some degree. My trading in years past was scalping oriented and simple. I was taught that a good trade was right almost immediately. If it went against me, I'd cut it immediately and look for a better entry. This is absolutely nothing like that. A good trade may take weeks to develop. It's been really hard for me to sit through the troughs and it's been even harder to watch an okay profit get taken out by a big swing in delta. Part of me wonders if I am cut out for this style at all and if I shouldn't just take my 5k and start trading micro futures. But that's a different post...
I'll share a couple of my meager learnings:

My new questions :

That's enough of this wall of text for now. If you made it this far, I salute you, because this shit was even longer than my last post.
submitted by bogglor to options [link] [comments]

TokenClub Bi-Weekly Report — Issue 114(5.4–5.17)

TokenClub Bi-Weekly Report — Issue 114(5.4–5.17)
Hello everyone, thank you for your continued interest and support. In the past two weeks, various tasks of TokenClub have been progressing steadily. The product development and community operation progress this week are as follows:
1. TokenClub Events
1)TokenClub & 499Block reached strategic cooperation in live broadcasting
On May 28th, TokenClub and 499Block reached a strategic cooperation to jointly build a live broadcast ecosystem in the vertical field of blockchain.
2)520e events
When 520 comes, TokenClub launches live interactive interaction. During the event, participate in interactive questions in the live broadcast room or forward the live poster to Twitter and the telegram group, and upload a screenshot to have the opportunity to extract 520, 1314 red envelope rewards

3)Text version of live content is abailable on Medium
In order to better understand the live broadcast of TokenClub by overseas communities, we translated the live broadcast content into English and uploaded it to TokenClub’s Medium official account, so that the community’s small partners can view it.
4)Preview: TokenClub’s self-media grandma is invited to participate in the golden financial theme live event
From May 29th to June 4th, Golden Finance will hold a five-day live broadcast of the theme of “Finding Double Coins”. Grandpa Coin will express his views on June 3, welcome to pay attention.

2.TokenClub Live
1) Summary
Recently, Binance Co-founder He Yi, TRON founder Sun Yuchen, Hobbit HBTC founder Ju Jianhua, OSL chairman Dave, BlockVC founding partner Xu Yingkai, Outlier Ventures founder amie Burke, Bitribe founder SKY, CryptoBriefing CEO Han Kao , Huarai Group / Vice President, Global Market and Business Leader Ciara, Guosheng Securities Blockchain Research Institute Sun Shuang, Tongtongtong Research Institute CEO Song Shuangjie, Jin Tiancheng Law Firm Senior Partner Yu Bingguang, Binance China Jiang Jinze, principal researcher of Blockchain Research Institute, Meng Yan, vice president of Digital Asset Research Institute, co-founder of Primitive Ventures & director of Coindesk advisory board-Dovey Wan, founding partner of Genesis Capital & co-founder of Kushen Wallet Ocean Liao Yangyang, Binance C2C-Kathy, Binance OTC-Coco, Binance Contract & Options-Justin, Binance VIP-Jennifer, Binance Broker-Jess, Binance Mining Pool-Denny, Harbin Institute of Technology Blockchain Research Executive Deputy Director Xu Zhifeng, dForce founder Yang Mindao, Mars Finance co-founder Shang Silin, Cobo & Yuchi co-founder Shenyu, well-known investor Xu Zhe, CasperLabs CEO Mrinal Manohar, CasperLabs co-founder Scott Walker, Chairman of Rock Tree Omer Ozden, Nova Club incubation team leader & Waterdrop Capital partner Zheng Yushan, Rolling Stone miner founder Alex Lam, BitUniverse coin founder Chen Yong, Odaily Planet Daily founder and CEO Mandy Wang Mengdie, Binance stablecoin BUSD project responsible Helen Tu and senior expert of TokenClub blockchain and cryptocurrency investment strategy-Zao Shen talks with you about blockchain things ~
On May 18, Block 101 Binance Key Account Manager Luna talked to Primitive Ventures co-founder, non-profit bitcoin development fund Hardcore Fund executive director, and Coindesk advisory board director-Dovey Wan, to understand “C and C How is the Goddess of Crypto Assets made? “Dovey Wan shared with us on asset allocation, investment judgment, entrepreneurship, DCEP, etc.
On May 19, Block 101 Yingge talked with Sun Zeyu, the founding partner of Genesis Capital and co-founder of Kushen Wallet, to share the theme of “Blockchain Investment Experience”. This investor, who is rated as “reliable” by insiders, recommends that novices try not to touch contracts, do not stay overnight even when making contracts, be alert to risks, refuse gambling, and rationally analyze investments.

On May 20th, 499Block ’s two-year birthday carnival “Global Hot Chain, Keeping Together for Every Year” celebration was held in the TokenClub Live Room. The cross-border AMA Solitaire + popular day group anchor live video sharing, including Binance Co-founder He Yi, TRON founder Sun Yuchen, Hobbit HBTC founder Ju Jianhua, OSL chairman Dave, BlockVC founding partner Xu Yingkai, Outlier Ventures founder amie Burke, Bitribe founder SKY, CryptoBriefing CEO Han Kao, Huobi Group / Vice President Global Markets and Dozens of blockchain leaders from home and abroad, such as Ciara, the business leader, all appeared on the scene, and 499Block became a popular beauty angel group to help the interactive host.
On May 20, Sun Shuang, senior researcher of Guosheng Securities Blockchain Research Institute, Song Shuangjie, Jin Tong, CEO of Tongzhengtong Research Institute were jointly invited by Lingang Xinyefang, Lingang Innovation Management School, and Binance China Blockchain Research Institute. Tian Bingguang Senior Partner Yu Bingguang, Binance China Blockchain Research Institute Chief Researcher Jiang Jinze, Vice President of Digital Assets Research Institute Meng Yan, and many experts talked about the “Critical Digital RMB DCEP” in the live broadcast, one A feast of intertwined thoughts is worth watching again!

On May 21st, Ocean Liao Yangyang, the founder of Block 101 Seven Seven Dialogue Force Field, focused on the “big enlightenment era of digital assets”, Ocean shared with us his entrepreneurial experience, the first pot of gold, public chain, currency circle and Analysis of the current market. Regarding the future of Bitcoin, Ocean feels that he can work hard towards the direction of digital gold and become a substitute or supplement for gold. He is determined to see more, because the ceiling of the entire industry is very high, and he still cannot see its end point. The index level is rising, far from being over.

On May 22, “In the name of the Pizza Festival, we came to a different live broadcast” Bringing Goods “”, which was organized by the girls in the 101-day group of the block: June 6, July 7, Sisi, Yingge, Qianjiangyue , Dialogue: Binance First Sister, Binance C2C-Kathy, Binance OTC-Coco, Binance Contract & Options-Justin, Binance VIP-Jennifer, Binance Broker-Jess, Binance Mining Pool-Denny. We have explained to us one by one about C2C, OTC, contract options, etc. If you are interested, please move to the live room.
On May 22, Block 101 Sisi Dialogue Xu Zhifeng, executive deputy director of the Blockchain Research Center of Harbin Institute of Technology, shared the theme: “Strategy of Great Powers: Seizing New Highlands of Blockchain Technology”. He expressed his views on his own currency circle experience, entrepreneurship, blockchain technology, DECP, etc. Xu Zhifeng is very optimistic about the future development of blockchain. He said: “Ten years later, blockchain will become a very common industry. We are the Internet industry and have never changed.”

On May 23, the old Chinese doctor Zao Shen from the coin circle went online ~ The theme of this issue: If you want to be short, you must be able to sing first, and if you want to be long, you must be patient. If the meal is not fragrant, the game is not good, and the happiness of the past has drifted into the distance, just because the daily reading is still a loss, and the head is hurt. Don’t panic, the old Chinese doctor Zao Shen of the currency circle will adopt the Trinity Interventional Therapy and precise care to regenerate life. Don’t move quickly to the live room to see what “therapy” is.

On May 25, Block 101, July 7th conversation with dForce founder Yang Mindao, talked about “DeFi opportunities and challenges.” Yang Mindao believes that the four biggest benefits of DeFi are: programmability; non-custodial nature; non-licensing; composability. He believes that the current public chain market is seriously homogenized, and the most promising public chain is Ethereum. Ethereum is the best and largest in terms of developer group, ecology, and technological evolution, and can absorb the advantages of each public chain. At the same time, he is also extremely optimistic about DeFi, “DeFi application value is gradually verified, and the value of this type of token will gradually become more prominent.”

On May 26th, Mars Finance co-founder Shang Silin Hardcore Dialogue Cobo & Yuchi co-founder Shenyu and well-known investor Xu Zhe. The trend of “financialization” in the digital asset industry is becoming more and more obvious, and the friends of miners need to master more and more skills. Unveiling the mystery of hedging for everyone.

On May 26th, Nova Superstar Dialogue Phase 13 focused on the Silicon Valley star project CasperLabs, specially invited CasperLabs CEO Mrinal Manohar, CasperLabs co-founder Scott Walker, Rock Tree chairman Omer Ozden, and Nova Club incubation team leader Water Capital Partners Zheng Yushan, discuss CasperLbs together.
On May 26, Block 101 Sisi talked with the founder of the Rolling Stone Miner, Alex Lam, and took us into the “post-worker life” of a PhD in finance. Alex shared the reasons for entering the coin circle, the first pot of gold, mining, pitted pits, investment experience and opportunities in the digital currency industry. Alex said: Bitcoin exceeds US $ 100,000, and it will be in the second half of next year or the year after.
On May 27th, Block 101 Yingge talked with BitUniverse founder Chen Yong and shared the theme: “Who” needs grid trading. Chen Yong mainly introduced the currency trading tool of Bitcoin. In his view, grid trading has changed an investor’s concept-from stud into a batch of positions and positions. Regarding the price of Bitcoin, Chen Yong believes that the price of Bitcoin may reach one hundred thousand dollars around 2030.

On May 28, Block 101 Binance Mining Pool Wu Di talked to Mandai Wang Mengdie, founder of Planet Daily Odaily, to learn more about the process of “media entrepreneurs marching into the blockchain from venture capital circles”. Mandy believes that the core competence in the media industry is high-quality original content, which is the most basic but difficult to stick to. The initial focus of entering the mixed media industry of the dragon and dragon is to focus and amplify value.

On May 29th, Block 101 Qianjiangyue Dialogue Hellen Tu, the project leader of Binance Stablecoin BUSD project, talked with everyone about the stablecoin “Life and Death”, Hellen shared the stablecoin in detail, and published his own the opinion of. For details, please move to the live room.

On May 30th, Zaoshen came to share the theme: Dongfeng blowing, bullets flying, unlimited chase? In this issue, Zao Shen shared with you the recent international financial situation and various major events in the United States in the past week, which extended to the impact on the currency circle and answered various questions about investment strategies. Friends who want to know more details can move to the live room of Zao Shen.
3.TokenClub operation data
-Live data: 13 live broadcasts in the past two weeks, with over 800,000 views. TokenClub hosted a total of 870 live broadcasts with a total of 45.06 million views.
-Binary trade data: In the past two weeks, guess the rise and fall to participate in a total of 1268 times, the amount of participation exceeded 2 million TCT. At present, it is guessed that the rise and fall function has participated in a total of 1.11 million times, with a cumulative participation amount of 498 million TCT.
-Chat data: In the past two weeks, a total of 19271 messages have been generated. A total of 4.85 milliom messages have been launched since the function was launched.
-Mini-game data: The mini-game has participated in a total of 4212 times in the past two weeks. A total of 1,66 million self-functions have been online.
-Cut leeks game data together: Since the game was launched, the total number of user participation in the game was 962612 TCT total consumption was 6,27 million gift certificate total consumption was 15,95million and TCT mining output was 161496.
-TokenClub KOL data: Over the past two weeks, the total reading volume of the BTCGrandpa article has been viewed by more than 300,000 people.
-Social media data: At present, the number of Weibo official accounts is 18033 and the number of Twitter followers is 1332 and we have opened the official Medium account this week, welcome to follow.
-Telegram official group data: In the past 2 weeks, there were 238 chats in the group, and the total number of Telegram official groups is currently 2906.
-Medium data: Medium official account u/TokenClub has published 5 excellent articles, official announcements and updates are published in English, welcome to follow.
1)Overseas Community
TokenClub held an event for forwarding Twitter and telegram group chats for overseas users. Bitcoin halved in less than two weeks, overseas users are more active in the telegram group, and some friends are more concerned about Binance Block 101 live broadcast, aggregation exchange, TCT usage and other issues, the administrator responded in time.On May 12th, when Bitcoin was halved, TokenClub organized a forwarding Twitter, telegram group chat prize event and participating in a live question asking interactive prize event for overseas users. There are many live broadcast events in the near future. The live broadcast poster information will be released to overseas users as soon as possible. The follow-up TokenClub will translate and broadcast high-quality live broadcast content to Twitter and Medium. Bitcoin halved, overseas users are more active in the telegram group, and some partners are more concerned about block 101 live broadcast, bitcoin future price trend, TCT usage and other issues, the administrator responded in time in the group.
2)Domestic community
Sweet Orange Club Weekly News
Last Friday, a holiday, the community opened the red envelope rain event, and brought a sincere gift to everyone while relaxing in the holiday. At the same time, it also sent the most sincere blessings to all mothers in the community on Mother’s Day. Thank you for your long-term support and help to the Orange Club community.

Hundred-day scheduled investment event (Phase II)
The fourth week of the second 100-day fixed investment plan held this week has been awarded, and everyone is still very active in this event. This week, the Bitcoin halving market was also opened in advance. The small partners participating in the fixed investment should now have a certain floating win, so we adopt the correct cycle investment strategy to believe that it can bring unexpected benefits to everyone.
Sign in the lottery.
On the evening of May 3rd and May 10th, TCT Fortune Free Academy carried out the 51st and 52nd week sign-in sweepstakes, and rewarded the small TCT partners who had always insisted on signing in. In these two sign-in sweepstakes, the lucky friends received 20–180TCT as a reward. In addition, during the lucky draw, the college friends also actively expressed their opinions on the topic of this year’s bull market.

The Leek Paradise Community Conference will continue as usual every Sunday at 20:00. During the conference, members will discuss recent hot topics, including gifts and blessings for Mother ’s Day, and the halving of Bitcoin everyone is paying attention to. At the end, the friends in the group also showed a rare enthusiasm at the first sight. It seems that the market still affects the mood. The members routinely started a red envelope rain to cheer for the participating partners and encourage everyone to maintain patience and confidence. Of course, at the same time, we are encouraging ourselves to see the community meeting next week. Come on!

TokenClub volunteer community, sign in red envelopes every day, as long as you sign in every day, you can get good benefits, friends join us quickly! In the past two weeks, the community has conducted active partners.
Volunteer community: Change to the currency circle consultation and pass the analysis of Grandma Coin and Panda analysts, support TokenClub in action, and continue to vote for TCT. In the last month, we have worked hard to learn the rain god’s strategy. We have doubled the coins in our hands. The community WeChat group has recently injected fresh students. We look forward to more people joining! Volunteer community, will continue to work hard for TokenClub
TCT has been listed on Binance、Okex、、ZB-M、MXC、Biki、Coinex、BigOne、Coinbene、Cybex、SWFT、Loopring、Rootrex etc.
TokenClub website:
submitted by tokenclubtct to u/tokenclubtct [link] [comments]

discussion regarding POP (probability of profit)

Ok, there seems to be some confusion about POP, making it way more mystical or even "proprietary" than it needs to be, but option PRICING and positioning is crucial in understanding the fundamentals.
First, the actual POP formulas (you can skip this, I'll show you the quick math below in lieu of these, but it's simple formulas for Pete's sake):
Credit Spread: 100 - [(the credit received / strike price width) x 100]
Debit Spread: 100 - [(the max profit / strike price width) x 100]
Iron Condors: 100-((credit received/width of spread)*100)
Naked Options: Strike Price - Premium = breakeven. 100 - (probability of breakeven ITM)= POP
So what is POP? It's the risk/reward weighed over a probability (bell) curve at the time you place your trade. This is reflected in the premium price received weighed against the likely risk or capped max loss.
What is delta? Amount of directional risk.
"Back of the envelope" POP calculation: 100 - delta = POP% (e.g., short 0.30 delta put has 70% POP, an iron condor with 0.16 delta put and 0.16 call is 68% POP) If you do the math, this gets you darn close to the formulas above)
1) The price doesn't set the market, the market sets the price. Just like the Cowboys are 9-1 odds to go to the superbowl, or paying $750 a month for insurance because you smoke cigarettes, it's marketplace, it's statistical. It's definitely not blind magic.
2) Let there be range! Distribution, standard deviations, distribution curves and yes, even variance! It's how the world of options are PRICED and modeled. Price is derived from supply and demand driven by speculation, leverage, binary events (earnings) and fear (hedging)! Implied Volatility (IV) expands and contracts affecting both delta (directional risk) and premium pricing, which in turn affects POP calculation. (Think of the distribution curve expanding and contracting in width and what that means to premium prices and POP) Keep in mind, as the underlyings change, so does delta, so does the risk profile, so does POP. It's dynamic after all. But at the time I place a trade there is a statistical range and liklihood, risk/reward, expressed as POP. That's all. Nothing more. Doesn't mean I'm guaranteed a 70% success rate over 45days, ship it!! All it's saying is what the current marketplace is willing to pay at a given likelihood at that moment vs the accepted risk. (odds)
3) The markets are priced to perfection, fear is overstated. When markets tumble, firms buy up puts for protection and the IV shoots up (demand driven). Another example, when earnings comes around the buying demand goes up, the uncertainty rises, the IV expands, the delta curve widens. IV can be overstated in its rise, and even exploited during binary events in it's collapse, given that IV ALWAYS reverts back to the mean. This edge is not huge, but is figured to be 2-3% in favor (outside of binary). IV influences price, which affects POP.
4) The art of adjustment. If delta moves too high (risk), adjustments can be made by rolling (up or out) or with offsetting positions (i.e.,opposing spreads or pair trades) to reduce the position's overall delta... while often collecting additional premium while doing so! You can not do that cheaply or easily buying options...and guess what? Adjustments have POP! Furthermore, Tastytrade studies are showing that managing winners aggressively (i.e., 50%) increases POP even further, in that, we are reducing the number of days the trade is on and therefore eliminating risk increasing win rate. We can see 70% POP trades actually become 80% POP by adjusting at 50% profit.
5) Why does TastyTrade coin the term POP? First of all, every trader and brokerage platform models the probability of profit in similar form, it's just terminology. IB calls it "percentage of profit" for example. But moreso, your brokerage doesn't know how to trade options, doesn't give a fuck to teach you about trading options. Buy calls, pay 1.50-$8 a trade, and wait until expiration helplessly. TastyTrade is free. Ad free even (how refreshing). And if you want, they offer the cheapest brokerage fee out there in TastyWorks, if you so oblige.
Keep in mind this discussion did not touch on theta (time decay/acceleration) or gamma (delta velocity) which further affect price movements.
References: Start at 8:30mins:
Start at 4:30mins:
submitted by Realdeal43 to options [link] [comments]

Reign and Reverie full spoilers first impressions

I'm going to give my first impressions of the new spoilers from Reign and Reverie but I don't think my opinion is particularly special and I'm more interested in sparking a conversation (and getting a chance to nerd out to a group of people who might care). I'm honestly just super excited and wanted to write about it.
Gnat: I'm excited to try this out. Deck building for a 40 card runner is uniquely challenging and fun and his ability seems interesting to build around. Obvious synergy with Patchwork and Guinea Pig, but it also works well with Earthrise Hotel. Probably weaker than MaxX, but as a I hipster I'm okay with that.
Divide and Conquer: Super interesting. Costs as much as Deep Data Mining for two accesses, but if the Turning Wheel synergy is confirmed to work it will become a staple Anarch card (and like DDM, might even be exported despite the 4 influence). One of the only cards I see slotting easily into Reg Val.
Guinea Pig: good number, and great if you're playing it with Patchwork. 8 Credits for a click is absurdly good, more if you're using it to help trigger Gnat. I'm definitely going to try to make this a thing, but I also think it's probably max 2x since it does require you to play around it.
Patchwork: It turns every card in your grip into a weaker Career FaiModded/one time use super PrePaid. I think this is going to be very strong so long as you can maintain the card draw to fuel it. Again, I don't see this just slotting into existing lists (although I could be wrong) and even if it does, it will be better in Gnat than anywhere else. It also removes the disadvantage of playing multiple copies of unique cards (as Faust did), so you probably always want 3x of this awesome console.
Hijacked Router: It's hard to say exactly how good this is, but it seems very strong. Its like a mini-Vamp that you can combine with other run events: Dirty Laundry + Hijacked router is a working class Diversion of Funds. Particularly good at helping you land Mining Accident. I love aggressive running and cards that encourage it, so I'm excited about this. It also hoses Asset Spam, which I'm very happy about.
Cradle: Interesting breaker, but one of the weaker cards in this box (I think). While it synergizes nicely with Patchwork, Gnat, and Guinea Pig in theory, I think the Conspiracy Breakers work much better with that suite. It also needs at least 1 Data SuckeIce Carver to break DNA Tracker (although it can in theory break it for very cheaply), which can make face checking risky, especially with few cards in hand. But it has great flavor and is way more balanced than Yog.
District 99: Ooh, this is super cool. Fits great both into MaxX decks and into Patchwork decks, which presumably will be trashing Programs and Hardware at a fairly constant rate. I like that it only recurs in faction stuff, because that dramatically cuts down on the possible bullshit you pull with it in Anarch. On the other hand, this looks absolutely killer in Geist: just going to trash my Spy Cameras so that I can play another Diversion of Funds. I love this card. The numbers are such that it might be slightly below the curve, but I love the weird deck building possibilities it brings up (you can also do fun Aesop's/Exile stuff in Shaper).
Liza: Wow, there is so much going on with this ID. The lack of "May" on her ability is great flavor although perhaps a bit too punishing. The lack of link makes Citadel Sanctuary a less attractive option than it would have been, although it's certainly still usable. Good luck stealing a QPM without Dorm Computer (a card which suddenly looks very playable)! Fundamentally, lack of card draw is one of Criminal's biggest weaknesses, so an ID which fixes that is inherently strong.
Hot Pursuit: Yes! King "Boggs" Solomon decided to cut Account Syphon in half and this is the part we were missing. Awesome in Ken and at least worth considering in any Citadel Sanctuary deck. Grade A+ art (which is true of a ton of cards in this box). Also, low enough influence that Jesminder might get in on the action.
Paragon: Balanced Desperado, but now with scrying? As others have pointed out, the costs of repeated runs are higher than they used to be, so this might actually be better than Desperado in the current meta. Scrying is great in a faction with inadequate card draw, and money is always amazing. And unlike when Desperado was king, Security Nexus exists as a serious competitor in Control Criminal lists.
Bankroll: More evidence for my Boggs as secret King Solomon theory. This is extra awesome in Geist (yay bins)! I'm just so pumped that Criminal is finally getting support for run based economy again. Criminal is going to be a diverse faction after this pack, and that is super exciting.
Tycoon: It says "Fracter," which makes Wraparound Turtle edible. It also breaks Seidr Adapative Barrier (nemesis of Nexus Criminal decks) for a reasonable amount. I think it's great even with the downside (although I don't plan on using it to break ice frequently), and I love the design.
Thunder Art Gallery: Wow. Citadel Sanctuary decks love this, but it might be a bit too slow. Regardless, this makes Liza's tag much less of a disadvantage. Great synergy with Hot Pursuit. Again, just a fascinating card that encourages weird deck building shenanigans.
Miss Bones: Relatively boring, but a good card for punishing Asset Spam. Ten conditional credits for a click is very solid, although the "only installed" cards part is a bummer.
Akiko Nisei: First Shaper econ denial ID which completes the trifecta with Reina and 419. But also the first reason for the runner to play Government Investigations (if they want to push the access at the cost of the Corp paying less). Giving her less influence but a link is a very interesting decision. I think she's cool and I look forward to seeing her in action.
Insight: Wow this card is weird. Lots of info at the cost of two clicks and letting the Corp rearrange part of R&D. With Mind's Eye you can basically be guaranteed they won't put an Agenda on top, so you probably want Maker's Eye or DDM as a followup. But they why not just play that in the first place? I'm not sure how good it is, but I like that we're getting a new and unique way to pressure R&D.
Mind's Eye: Weird and unique. Seems like you want to try to build it up early and mid game and then use it to maintain R&D lock later on when it's more expensive to get in. It does trigger Akiko's ability, which is very interesting.
Mache: Of the three anti-asset spam cards in this box, this is the weirdest. I would have to see this in action before I pass judgement, but the install cost is low and instant speed card draw is good. Whether or not this is playable will depend pretty much entirely on whether people are playing trash able cards other than Rashida and NGO front in your meta.
Ika: Excellent flavor text, and just an amazing breaker. It breaks Archer for 6 credits if you don't have to re-host it and 8 if you do. Even if you're re-hosting it every time you break something, the numbers on it are so good (especially that install cost) that it's probably still a good breaker. It's also low enough influence to see play in Criminal and Adam.
Kyuban: I was pumped to see Criminal getting more run based econ support and I'm just as excited to see Shaper getting it (but in a distinctly Shaper way). Shaper already had Cyberdelia, so it isn't a totally new theme. This is vulnerable to the ice it's hosted on being trashed, but then you basically have a zero cost Parasite. Don't install it on Vanilla.
Psych Mike: Very cool bit of run based econ. Nonbo with Indexing, but scales with DDM and The Maker's Eye as well as Akiko's ability. Giving you money for accesses also means that you can more readily afford to play the Psi game or it lets your turn Akiko's ability into you gain 1 and they lose 1, which isn't bad at all.
Algernon: Cool ability, seems over costed. Adam doesn't have exceptionally efficient clicks, so you will be hard pressed to make this worth it most of the time. However, it gets better if you're playing ABR and can give you the clicks you need in a pinch to draw up to steal Obokata or click through a pesky Bioroid. Probably 1-2x in Adam, and it might see play elsewhere.
Reboot: Very good mid-late game card for Aesop's Apex. If it didn't remove itself from the game, you could recur it infinitely with Assimilator and Same Old Thing.
Office Supplies: Solid, flexible Sunny card. Too high influence to ever get splashed. I like that you can use it as a slightly smaller Quality Time early game or another Hedge Fund if you set up enough link.
DJ Fenris: People have written a bunch about the weird stuff you can do with him, nothing to add.
Sportsmetal: I'm a diehard HB fanboy but I haven't been playing them since I returned to the game at the beginning of Kitara because I hate CI. This ID looks great to me. Flexible tempo is strong, especially when it works regardless of who is advancing their game state. Interestingly, my opponent playing Film Critic isn't upsetting at all because them losing two clicks every time they steal is also great tempo for me. Indexing multiple agendas against this ID is super interesting because of the optional card draw in between them. Honestly, this is the most exciting ID in the box to me.
Hyperloop Extension: 3/1s are bad, but this is good tempo in Sportsmetal (especially with Team Sponsorship). This is definitely a "We'll have to wait and see" card.
Meridian: Wow, the numbers on this are great. Worst case scenario it's a 3 credit tax for Paperclip. Unlike other porous ETRs, this one is significantly less likely to lose you the game thanks to it subtracting agenda points. The face check is also just hilariously good tempo.
Gatekeeper: Weird and I love it. The first of several semi-Jackson Howard cards we get in this box. Like the others, this gives you tempo and then lets you deal with flooding. A 6 strength Code Gate is not fun to break for anything but Amina. If it fires, you get tempo, deal with flooding, and end the run, all for a reasonable price.
Divert Power: This card is 1 influence, so the jank possibilities are endless. Combos well with Gatekeeper, Formicary, Campaigns, Advanced Assembly Lines, Elizabeth Mills, Lily Lockwell, and any cheap cards (looking at you, Vanilla). Very weird and cool.
Fast Break: Hmm. Interesting tempo card, not sure how good it is. Probably only want 2x, but if you can consistently land -1 point agendas and feed them sections of Hyperloop, then this can get pretty bonkers pretty fast. At two Agendas it combos with Calibration Testing to draw cards and Fast Advance an agenda. Definitely going to try this, could be bonkers.
Game Changer: Wow, this card is hilarious. It's a very silly version of Biotic Labor. It being trash-able is a bummer, but probably necessary given how strong it can be late game. Again, like Fast Break the strength of this card depends on how consistently you can feed them lots of agendas that don't lose you the game. I don't see this replacing Biotic Labor so much as complimenting it as a finisher.
Giordano Memorial Field: Great flavor, very interesting defensive upgrade. Useless early game, but quickly becomes strong. It also synergizes really well with Ash. It's nowhere near as oppressive as Ash+Caprice, but they can be extremely taxing together late game.
Saraswati: Interesting tempo ID, also good for playing Nisei or Snare! Jinteki has so many good IDs that it's great to see a new one that's probably unique enough to see play. And it's efficient enough that it might even be competitive. I honestly hope not because I hate playing against shell game Jinteki, but we will see.
Jumon: Much easier to score than Mandatory Upgrades, especially out of Saraswati, but I can see you losing more games where you successfully score this compared to Mandatory. Hilarious tempo, lots of bluffing. Cool card!
APS-I: Nice bit of econ support for the Jinteki bluffing we're getting support for. Every archetype needs some way to make money, and this is cool because it doesn't slot into everything. SSO and BoN might also want this, but 2 influence a piece is a bit steep.
Neurostasis: Probably the strongest trap in the game. Tutoring is generally harder than recursion, especially for Anarch, and its good tempo against everybody. The downside is that its expensive.
Otoroshi: Fun card with good enough stats that it might see more competitive play. This is some good old fashioned Jinteki bluffing on a really solid piece of ice.
Thimblerig: Weird and cool. We're getting some more stuff like this in R&R. Swapping your gearcheck around provides some really interesting tempo options: put this in front of Rashida turn 1 and ice a central. If they run Rashida, then you can move this to HQ if you didn't draw another or an Agenda. (Importantly, you can trigger Rashida before this, although you must do both before you take your mandatory draw.)
Hangeki: Gives shell game Jinteki a way to slow the runner down, which is super important because the best way to beat shell game is to win before they get to game point and can make you play the shell game at all.
Daruma: Wow, this card is bonkers. It can be used as a defensive upgrade, as a way to feed the runner Snares!, or to swap your agenda into another server right before access. There are a ton of possibilities and all them are kinda mind bending.
Acme Consulting: As someone who has lived in Saint Louis and Chicago, the art on this ID is wonderful. It reminds me of the Board of Trade Building in Chicago, which was one of the first commercial buildings with electric lights and is still one of the best examples of Art Deco. The ability is also great! It forced me to go back and look through NBN's extensive ice suite and identify cards with conditional "if the runner is tagged" abilities. Looks like a solid midrange identity given how overstated a lot of that ice is.
Fly on the Wall: Not Broken News. Interesting tempo ability. Install+Advance to threaten Exchange of Information/Closed Accounts next turn. I'm glad this exists, even though it might be too weak to see play.
SIU: The numbers on this are bad (which is true of remarkably few cards in this box), but the effect is potentially interesting. Landing a tag clicklessly opens up some more convoluted plays like Closed Accounts + HHN while using CV to play one of them. You could use this to begin a Threat Level Alpha combo, but you have to protect it. I think this might be one of only a few cards in this box that doesn't see much play, unless someone discovers something broken to do with it.
Peeping Tom: The numbers on this card good, and information about the runner's hand is valuable. Plays nicely with Ibrahim Saleem, Saleem's Hospitality, and Standard Procedure. Can also just be decently taxing ice and will almost always end the run if they face check it. I like it a lot.
Hydra: This is a disgusting piece of ice to face check, especially against Acme. Instantly puts the terror into runners, which is great. It also has the same strength and only one subroutine fewer than Archer, so it almost as hard to break. ETR on a piece of ice with a nasty facecheck is great so long as the numbers are good, and they are here. Remember that after the first sub resolves the runner will have a tag (unless they avoid it) and the nastier part of the remaining subs will fire.
Eavesdrop: Link is in the meta in a big way, so I don't expect to see a ton of this. But its a cool way of adding an additional tax to your ice.
Attitude Adjustment: Another Jackson Howardish that gives you tempo and hides agendas. If you reveal two agendas then this is drawing you two cards and netting you two credits, which is pretty solid just as far as tempo goes. Becomes worse if you're running fewer agendas or if you want to rush them out.
Arella Salvatore: This is how we end up banning CI. But seriously, tons of combo potential. As just a pure tempo card, it's solid. Outside of some ludicrous combo, I'm having a hard time figuring out how to use it for fast advance. Regardless, it's kinda like a weird Team Sponsorship without the recursion.
The Outfit: First card that actually rewards you for taking bad publicity from other sources (No, Ireress doesn't count). Only a few (previously printed) bad pub cards are strong enough to see play, but Hostile Takeover is already ubiquitous and is even more incredible out of this. Luckily, R&R is providing us with a cool pad pub tool and a win condition, so The Outfit should be at least moderately viable.
Broad Daylight: Wow, this card is really cool. Score two of these with a couple counters on each and watch the runner desperately scramble as you do 4 meat damage per turn until you run out of counters. As others have pointed out, this has some synergy with Armed Intimidation. It might honestly be worth running in a bad publicity deck as just a pure tempo card rather than as a win condition.
Drudge Work: Our third Savior replacement. This one is quite solid, especially in Blue Sun where you can just recur this forever if you want to be annoying. Unfortunately, the way to win right now as a Corp is by going fast, so I'm not sure how good these JHow replacements actually are. In a vacuum, this and the other two both seem quite strong. Perhaps they will encourage a meta slowdown.
Blockchain: I love the theme and the idea, but the numbers aren't good enough. You need four transactions in archives before it costs Paperclip even 1 additional credit to break it. This might serve to push Core Weyland where you can end up with a lot of Green Level Clearance and Beanstalk Royalties in archives very quickly. The big downside is the horrible anti-synergy with Bryan Stinson.
Formicary: Whoa, this is a strange piece of ice. A porous binary sentry that can be moved when you rez it? As with so many cards in this box, the design is just very interesting. Hard to evaluate, but I can see it being run out of Rush Argus.
Building Blocks: Make Blue Sun playable again! Combos with Orion or, if you're feeling spicy, Chiyashi, a bit like Oversight AI. If I'm interpreting the "Ignoring all costs" clause correctly to include install costs, then this will often be only a bit worse than Oversight. It saves you the install click, installation credits (which can add up in Blue Sun), and doesn't leave your ice vulnerable to being exploded by D4v1d. Overall, lower variance than Oversight AI, but fulfills a similar role.
Too Big to Fail: Outfit/Core Weyland love this. Super interesting design overall, directly opposed to most econ. In general, you need credits to make credits, whereas this only pays out if you're fairly strapped for cyber bucks. 10 credits for 1 click is a ton, especially when you can do that after getting Diverted down to 0. The bad pub is a big downside, but the trash cost is high enough that people will probably leave it alone (except for Freedom).
Under the Bus: Cool utility card with a big downside, unless you're playing into the bad pub game with The Outfit and Broad Daylight. Probably strong enough to see play outside of a dedicated bad pub deck, if I'm being honest.
Lady Liberty: Wow, this card is bonkers. It's a little like a SanSan City Grid in that it presents a must trash threat. On the other hand, it can only pseudo score you agendas of exactly the right agenda points. Also, only ever Asset Region (unless I'm forgetting something), so you cant combo it with any grid. It being unique isn't a huge deal since you can tutor it with Tech Startup.
In conclusion: There is just a ton of stuff to get excited about in this box. Only a very small number of cards that I don't think will see much play, and most of those at least fit into 1) a different meta (and frankly who knows what it will look like after this box) or 2) a fun if unreliable deck.
submitted by RepoRogue to Netrunner [link] [comments]

Opportunities In Materials Acquisition

Well, HFY you’ve sucked me in again. I HATE writing short stories, and I’m already writing a serial novel, but the idea of “How could humanity be exceptional in a universe full of life” is just so interesting!
Here’s another crack at that theme. Maybe you will like it. If you do, swing by the link above. Either way, I’d like to know what you think. 50% of the fun of writing this kind of stuff is talking about it afterword.
The Sol Dyson sphere was only about 1 percent complete, but that apparently meant it already it had 6 million times the surface area of Terra. I hadn't realized how huge that was until I visited the HR offices of the Sol Sphere Materials Corporation.
They had used a tiny fraction of the space they got as a principal builder of the Sphere to make several 1:1 scale models of Mars. Their HR office was on Mars 18 a version of Mars patterned after the Edgar Rice Burroughs novels. I’d never read any of those, but the Calot were cute in a strange way. The office itself was a giant crystal palace located at the top of Olympus Mons. It took up the entire 45 mile wide plateau of the massive mountain, and each individual in it had offices so big they left you feeling you were outside. Yet, I don’t think there was anyone important to the corporate hierarchy in that building or perhaps on the whole of Mars 18.
Of course, it was less an interview and more a formality.
“So,” Jenny said, “We’ve got your commercial gravitics, and shipping licenses, as well as an inspection of your ship on file. We’ve done a background checks and consulted your references, and you’ve agreed to all of the NDAs. So, as I see it, this conversation is mostly about making sure you’ve had a chance to ask all of your questions. What would you like to know about what we do here?”
“Umm.. I’ll be a ‘Materials Procurement Specialist,’ but I don’t know much about the position?”
“Sure, you know how there’s a lot of material in the sphere?”
That was an understatement. When completed, the sphere would out mass the original solar system several times. I nodded.
“When we started to gather the construction materials we assumed we’d do it the same way anyone does when they need more of some of an element: scoop up a bunch of hydrogen, compress it with gravitics until it fused, sort out the radioactive bits, and carry on with life.”
I nodded again, then realized the head waggling probably wasn’t delivering the impression I wanted, so I offered up an inanity to show I was listening, “My own spaceship has a program for that. I made a bunch of carbon just yesterday.”
“So you see why we thought nothing of it! Of course, the sphere is pretty big so we needed to start with more than just the interstellar media. We compressed a star.”
“Makes sense.”
“I know, right? But stars, as it turns out, are a wee bit hotter than the gas in deep space. If you force one to fuse into helium and then lithium and so forth it gets even hotter. Unusably hot, even.”
I thought about that. “I guess you could push it past iron. Then it would start sucking up energy.”
“Sadly, you never get to iron, because you get to quark gluon plasma first.”
Jenny smiled. She was stunningly beautiful and that made me revise my estimate of her age down. In a society of genetically engineered immortals, it can be hard to guess how old someone is but prettier people are typically younger. At first, looking really good is nice, but after a couple of centuries the extra attention gets annoying. You start to want to blend into the background until you do something worth noticing. “Still, when we poked a hole in the gravitic bottle it made a really lovely quasar. They actually flew everyone out from the office to watch. Quite pretty. To make it work we’d need vastly more surface area for the compressed material, and that would require more ships, but with more ships we can just get our materials the old fashioned way.”
“Dig it up?”
Jenny laughed, “Sort of! A materials procurement specialist collects planets with a high content in certain target elements, tows them back to the sphere, and we smash them up here for the goodness within.” She paused to consider, “I think it’s more like prospecting than mining. Does that sound like work you’d be interested in?”
. . .
“Alright, let’s snag that puppy and get out of here!”
“Captain, I’m afraid there’s a problem.” Humans have never came up with real AI. We have what is known as conversational expert systems. They’re programs with billions, or perhaps trillions, of responses arranged into careful trees each one of which can be subtly modified to convey information at least as efficiently as a human. Edsger, the ship’s main computer, was conveying that it really didn’t want me to hit it.
“What is it this time?”
“I have taken deeper scans of the gas giant. If it were to fall into the system’s sun it would stabilize it such that solar flares would no longer preclude the development of life in this system.”
Even though I’d asked, I knew what Ed was telling me, and he confirmed it. “We are not allowed to strip resources that may eventually be used by a developing race.”
“But why would the gas giant fall into the sun? It’s in a stable orbit, isn’t it?”
“It’s orbit could be perturbed by an interaction with another stellar body. I cannot perfectly predict the next 250 million years of this system’s movement around the galactic core, but I have enough data to predict it may interact with a few dozen other stars.”
“There is around a 1 percent chance during a single orbital period.”
“It’d become a binary star system! I can’t imagine any existing planetary orbit would be stable.”
That ‘don’t hit me,’ tone was back in Ed’s voice, “Over 99% of the time that’s what occurs.”
“Now correct me if I’m wrong, but there are only 4 intelligent lifeforms in the Milky Way, so that means that this star-system only has a one in a one hundred billion chance of developing life.” Ed didn’t correct me, even though I was wrong. We wouldn’t have been in the system if chemical analysis of the planets had suggested life was a possibility. “Two of those races will never leave their home planets, we’re the third, and no sane person cares about the fourth because they’re all assholes.”
“The Ultra Wolves and Lemon Kings may leave their home worlds as their stars begin to heat and expand.”
“Alright, one in a hundred billion then, not one in two or four hundred billion. So cumulatively we’ve got a, um, one in one trillion chance that life will show up here and want to mine this moon. That's about it, right, ballpark chance?”
Ed hedged, “The odds of an intelligent civilization mining this moon are too low to reliably calculate.”
“But you still won’t scoop it up?”
“Regulations absolutely prevent that, sir.”
My answer was an inarticulate growl. I’d found out why it was so easy to get the Materials Acquisition job a little while after taking it. The Sphere Materials Corp had agreed to be absolutely zero environmental impact and had accepted various governmental regulations to describe how that would be done. Panning for gold is hard, but panning for gold on a glacier with a teaspoon so you won’t break a single blade of grass is nearly impossible. Worse, I wasn’t getting paid by the hour. I’d get my money when they got their metals.
“Fine, take us to the next system away from the core.”
“That will take us very near the Lemon King exclusion zone.”
I knew that. The Lemon Kings are an almost-human race. Their ordinary citizens (Lemon Commoners perhaps?) are more or less exactly like genetically baseline humans. Physiologically that is, physically they look like a man sized crab with tentacles. However, they’ve got another subspecies that always rules their societies. Those are the kings that give the race their name. Well, that and they speak with “sent words”; the name for their species smells like a lemon.
The Kings are better than the commoners. Bigger, stronger, faster, smarter, kinder, and most of all more forward thinking. They rule really well. The Lemon Kings avoided many of humanity's tragedies, but they also worked themselves into a box. The Kings weren’t willing to risk any threat to their species as a whole, so when they reached certain technologies they just stopped. No nuclear bombs, no genetic engineering, no nanites, and definitely no gravitics.
Then they met humanity; a race that could accidentally cause quasars. The revelation of that must have been like an iron age village realizing a really clumsy giant was moving in next door. They were very polite about asking us to stay the hell away. We were polite about doing it. So a 10,000 light year wide sphere of space was ‘the Lemon King exclusion zone’. I was on the far side of it from human space; heavy atoms are more common near the core of the milky way.
However, I wasn’t in it.
“Does your programming prevent you from following my orders or collecting otherwise valid materials if you do follow them?”
There was a noticeable lag before Ed answered. I wondered if the regulations it was following were so complex even its titanic processors took a while to interpret them. “No,” it answered at length.
“Then set the course!”
. . .
“I love you! I love you! You beautiful, ugly, rock. I want to marry you and have your nickel metal core children and turn them into holographic mater emitters!”
“Captain, your metaphor is both self-contradictory and somewhat disturbing.”
“Shut it circuit face, you’ll never understand the love between a man and his heavy metal planetoid because you don’t truly have a soul!” I looked at the wall that had been turned into a view screen, and watched the flair of charged particles bending around the warp envelop of the mass we were towing. It really was a beautiful sight; so much so that I burst into whistled melody- the melody of the song “Physical Wealth” from the 3359 musical of the same name.
We had finally, finally, finally found a world I could pillage. It was the remains of a gas giant that had been orbiting very near a red giant star. Stellar winds had stripped away most of its gaseous outer layers and left only a fairly thin coating over the metallic core. Ed had been able to scan past that coating and let me know the planet I’d found was almost entirely metal. We’d used the ship gravitics to rip most of it out of the planet.
Now nearly one Earth mass worth of pure metal trailed behind us. That was a big strike. Not a fortune, but probably three normal years pay for me. I had been fantasizing about what I could do with that money ever since Ed had calculated its value. My plan was to buy a chunk of the Sol Sphere and start a business; something small and tasteful. As I understood it those recreations of fictional worlds were pretty popular. I couldn’t afford and entire mars, but with a loan, I might be able to recreate the Greece of the Iliad.
I could even set myself up as Zeus. However, I’d only go so far for authenticity. I wasn’t going to change myself into a swan to seduce any nubile maidens. That was just pervy. And how would it work anyway? A swan can’t have that big a…
“Captain,” Ed said in a worried tone breaking into my speculation. “I’m detecting an FTL signature; non-human.”
Oh hell, that could only mean one thing. Still, hope springs eternal. “Please tell me it’s probably some strange and bug eyed monster from outside of the galaxy, or perhaps from outside the very universe.”
“While I cannot absolutely reject either of those possibilities it is unlikely given our readings. The most probable explanation for the detected particles is a Stavanie FTL drive.”
“Awesome. Psychopaths off the port bow. We’re a long way out for them.”
“The Stavanie aren’t sociopaths, sir,” Ed said with the certainty of a conversational expert system that had been programmed to reject any interspecies prejudice. “We are farther than from their home world then it is believed they can travel.”
“So how did they get out here?”
“Perhaps they have achieved some technological advancement in their drive technology.”
“Or perhaps everyone on that ship is doomed, and they’re only flying it because they’ve all had bombs implanted in their brains.”
“That too is a possibility. Estimates of Stavanie gravity drive technology include survivability constraints.”
And that’s why I called them sociopaths; it was medically accurate. Humans, Lemon Kings, and Ultrawolves were all pack hunters in their prehistory. Well, Ultrawolves still are. The offshoot was we needed models of our fellow beings minds to coordinate with them. Empathy is baked right into the mold.
Stavanie were solitary hermaphroditic herbivores that lay a large number of eggs and then leave them. They see their fellow being as nothing more than competition for resources. Empathy is an alien concept- literally. Many of them aren’t even capable of language. They’re as smart as humans, but it isn’t inborn for them the way it is for us so learning to speak is like learning advanced mathematics. Their main social interaction is enslaving or stealing from one another. Though they will trade for resources if that's likely to be more efficient than taking them through brute force.
Fortunately, they’re not as advanced as humans and they never will be. Certainly they manage impressive leaps when one of their Einstein's or Wenn’s fights its way to the top of the societal pack and acquires slave armies, but that only takes them so far. For mankind a great many technologies required generations of research. The secret to offset gravitics, the technology that let us build Hawking generators and unlock basically limitless energy, had required a particle accelerator that belted the entire sun back when building such a thing had been a big deal. The Stavanie won’t do that because they don’t study things which aren’t directly beneficial.
“We can still hide from them right? Us and the rock we’re towing?”
“Of course.”
“In that case, toss the cloak of invisibility about our shoulders. I suppose we should also try to figure out what they’re killing each other about now. Move us as close to them as you can get.”
“Your orders require clarification. How close do you wish me to take us to the Stravanie position?”
“How close can we get?”
“We can intercept them in approximately an hour’s time. After that I can bring our hull directly into contact with their vehicle without being detected.”
“I am vastly superior to their ships.”
“Well don’t do that, but get us close enough for a good look.”
“Executing.” Space warped around the ship such that it was not really part of the universe. Any matter or energy Ed didn’t specifically gather would bend around it and flow past unaltered. The gravitic ripples this left were smoothed to a whisper. Thus hidden we went off to see what the Stravanie were up to.
. . .
“I now calculate there is over a 95% probability the Stravanie are headed toward the Ultrawolf homeworld or will intersect it without intending to.”
“Crap,” I muttered. I wasn’t exactly surprised. We’d followed the Stravanie armada through four star systems. We’d had no idea where they were going between the first and second ones. We’d learned each system was a fuel stop. They were skimming tritium out of the atmospheres of gas giants. As such, it wasn’t exactly a straight line. Still, in the third Ed had done a curve fit against our known data and told me there was a 50% chance they were going to go through the Utrawolf star system. This, our 4th system, apparently made it almost certain.
“OK, so we’re certain now, can we cut through the Lemon King exclusion zone to get them help?”
“No sir, certainly doesn’t matter, the exclusion zone is absolute unless I’m conducting lifesaving operations for a human.”
“We’re saving a whole species; the nicest one there is!” The Ultrawolves aren’t a technological race. Again, it’s a simple quirk in their phycology. Human desire is relative. If I build my Iliad Greece and set myself up as a god in it, soon I’d want to do Persia or Egypt as well. The bottomless well of “this is nice but it could be a bit better” in the human soul has propelled us from mud huts to a Dyson sphere and we were still trying to scratch the itch.
The Ultrawolves don’t have that. Their desire is absolute. Ed had filled me in. As long as there is a less than 1 in 10,000 chance they’ll starve, a similarly low chance they’ll be killed by a wild animal, a 1 in 1000 chance of death by disease or accident and a few other things like that for other kinds of death and injury they’re happy.
As such, they figured out how to raise herds of prey animals a couple hundred million years back and that was it. No more war, no more crime, no more technological advancement. They have a primitivistic utopia where everyone devotes themselves to art and philosophy. There are sects of Christianity that hold they never gave in to the devil like humans did, other religious and political groups have modeled whole worlds on copying their lifestyle.
The Stravanie would kill or enslave the wolves, because that was the only interaction a Stravanie could imagine with a creature that couldn’t defend itself.
“Saving non-human life is explicitly not an exception to the exclusion zone.”
“What? That’s some kind of crazy species-ism right there!”
“Shortly after the zone was formed non-humans were included but unscrupulous traders used ‘saving an Utrawolf life’ as an excuse to violate it. Statistically, there’s always an Ultrawolf dying that human tech could save.”
“This isn’t the same!”
“There is no applicable exception.”
My ship was fast. My ship was thousands of times faster than the Stravanie armada, in fact, but I couldn’t make it all the way around the exclusion zone, to the nearest human colony where I might find warships, and back in the time it would take them to travel a few dozen lightyears. Through it, yes, around it, no.
“In that case let’s provoke a fight.”
. . .
I dropped my cloak in the next system where the Stravanie stopped for fuel. They had an impressive operation going. There was a massive refinery ship sucking up huge volumes of planetary gas and then centrifuging if for heavy elements from orbit. It was an impressive technological achievement. Probably beyond anything humans could have achieved without offset gravitics. Of course, that was mainly because we’d never needed to work without offset gravitics, but still.
When we’d first spotted the Stravanie ship, Ed had told me he doubted their gravitational technology was capable of creating a safe warp envelope for that large an area. He’d detected small fluctuations in it energizing particles then allowing them into the twisted space that held the vessel. Now the ship had bodies orbiting in its weak gravity. Stravanie killed by radiation poisoning no doubt.
As soon as we were visible to the armada I had Ed broadcast a few threats, and a few demands for abject surrender. I’m not sure what a human fleet would have done if confronted by a new, and apparently hostile, race. I would have expected a certain amount of disorder. In this, the Stravanie were infinitely more prepared. A few hundred ships rotated toward me and opened fire simultaneously.
They had an impressive array of weapons. Space momentarily grew bright with the nuclear explosions, gamma ray bursts, rail gun tracer fire, and a half a dozen other things I didn’t even have a name for. One ship even activated its engines, or had them activated remotely, and attempted to ram us.
“How are we doing Ed? Any threat?”
“I’m sorry sir; there is no detectable stress in the hull.”
“Well can you switch to a weaker configuration?” Holographic matter is a misnomer. As it turns out, all matter is holographic. What seems like three dimensional subatomic particles are actual two dimensional strings. The different sorts of particles are actually holograms cast by different vibrations in the strings. By pumping preposterous amounts of energy into ordinary strings high energy vibrations can be created that cast unstable holograms for particles which don’t exist in the modern universe. One such example is the hyper energized gluons which are apparently capable of holding my hull together even with the Stravanie doing everything they could to rip it apart.
“Sorry, sir. We’re the weakest material rated for the hull of a warp capable vessel. It will stand up to minor warp field mis-calibrations.”
“Oh.” I probably should have asked that before I put my plan into effect. Ed had assured me he would defend me if the Stravanie actually became a threat. I hadn’t bothered to ask if they could scratch my paint job.
I sat in my ship while the Stravanie filled space with violent death. I let them hit me as much as they wanted. At worst, were wasting ammunition. At best, they’d manage to make a support creak ominously and Ed would reach out with our gravitics and smash them. They really put their backs into it. The bombardment went on for hours. Eventually I got bored and put a movie on.
Ed interrupted it a while later, “Sir, the armada appears to be fleeing.”
“We still can’t do anything?”
“No, sir.”
“And they’re still on course for the Ultrawolves?”
. . .
I raced ahead to the Ultrawolf home world trying to think of some way I could help them.
I considered towing their planet over to some other system, but Ed shot the idea down. He couldn’t hold a field that large stable enough for organics to survive the trip. I could cloak them, but I’d be blocking all sunlight and driving their gravity mad if I did that. Some wolves might survive, but not many. I could shield one side of the planet from bombardment with our gravitics, but not both. My sensors weren’t sharp enough to detect some of the weapons they’d demonstrated earlier if I was on the other side of the world surrounded by nuclear explosions.
I came up with a plan even so. I’d take the nickel-iron planet I’d been running around with the entire time and graviticaly twist it until it became a cap for one side of the planet. Ed said it would probably be possible for the ship’s gravity emitters to shape the various fields such that everything would stay in place and the Ultrawolf homeworld wouldn’t notice the strain. With that guarding half the planet, I could guard the other half with my ship.
I was so far from the design specs of my hardware that Ed couldn’t be certain exactly how things would work out. I could even screw up and drop a planet’s worth of heavy metal on the world I was trying to guard.
. . .
I was as ready as I could be when the Stravanie arrived. My big metal cup shield thing was in place over the night side of the Ultrawolf home world, and I was on the other. I had picked out a few Ultrawolf settlements to grab with my gravitics if my plan failed. At worst, I’d be able to save a few million of them. My ship could create a livable wrap envelope and hold heat and air in for that many, at least.
As the armada approached I broadcast a bunch of empty threats at them. I hoped they’d veer off because I’d already demonstrated all kinds of technological superiority. They ignored me. I guess I’d also already demonstrated I couldn’t particularly shoot back. They arrowed directly in on the planet, surrounded it, and opened fire on major population centers from orbit. I guess the plan was to kill a bunch of Ultrawolves from orbit so we wouldn’t have to fight them on the ground.
There’s a reason humans call the Ultrawolves, “Ultrawolves.” Well, several reasons actually. First, we can’t pronounce their name for themselves because we can’t broadcast our words in UHF. Second, they look kind of like six legged wolves. And finally, they weigh about 2 tons and can perform mind-boggling physical feats. They’re even tougher than a modern, genetically and cybernetically enhanced human and we’re not weaklings. Even with their technological advantage the Stravanie would lose if they tried to take on a healthy population.
Fortunately, Ed was able to bounce all of their bombs back into space.
On the back side of the world they pounded a single spot on my shield. I don’t know what the heck they were trying to do. Dig through it, maybe? If so, that wasn’t going to happen. The shield had a somewhat narrower cross section than the planet it was over, but not by a tremendous amount.
For a little while, the wolves were safe.
. . .
Two local days later the armada was still throwing death at the planet below me. I think they attacked so long out of desperation. I had interrupted their refueling when I’d intercepted them by the gas giant. They had probably assumed they could use the oceans of the planet below me for tritium. When I’d blocked it off, they’d had only two options. Land, or die in deep space. At least those were the two options they understood.
If they’d consented to it I could have hauled them back to their own home world, or somewhere else habitable. I’d even tried to tell them that, but they weren’t buying it. That wasn’t terribly surprising. They couldn’t understand my motivations. A Stravanie might fight to protect a valuable slave if it was certain it would win, but I hadn’t developed the planet below me so that clearly wasn’t the case and they had no concept of compassion. Without that concept, they also couldn’t understand why I’d show compassion to them. The next most logical explanation for my offer of safe passage was that I was trying to trick them into something.
I tried to explain, but my words were meaningless to them. Literally. Some of the words I wanted Ed to translate didn’t have Stravanie equivalents. What I was left with was a bunch of assertions without any logic behind them. “I don’t want the inhabitants of this planet to die.” “I don’t want you to die.” “I don’t want you to force them to do things.”
I think, in their minds, I was just contradicting myself. If I didn’t want them to die, I should allow them to make use of the beings on the planet below. They’d be more likely to live. But if I wanted them to live, what was I getting out of it?
Who knows, maybe I was contradicting myself. Human motivations and emotions make sense to humans, but there’s a gap between us as the rest of the universe. I despaired of bridging it during my arguments with the Stravanie.
. . .
The Stravanie ran out of munitions on the third day. I’d sensed it was coming. Their attacks had slowed, and they’d started trying desperate strategies. They’d massed fire. They’d spread it out. They’d used strafing runs to give their projectiles extra momentum, and they’d fired long looping shots that used orbital dynamics to attempt to hit a target. None of it had worked.
For about an hour, they sat and watched me and I sat and watched them. Stravanie ships look amazing. That’s an odd thing about them that I haven’t mentioned yet: Stravanie value aesthetics. You’d assume they wouldn’t. In humans, most art comes from a desire to communicate, and the Stravanie don’t have that. However, they do have art.
In fact, they pour more effort into art than any other race. A human slave wouldn’t care about the aesthetics of something he was crafting for a cruel master, but the Stravanie do. Everything they make is beautiful. They make delightful weapons to slaughter one another. They make cathedrals to hold their thralls. And their ships…
I can’t describe their ships. Oh, I could tell you of the shapes and colors they use. I could give you measurements and dimensions, but it wouldn’t show you one. Instead, let me say each one is pure flight, movement, and ascension given physical form yet undiluted.
Perhaps humanity is wrong about the Stravanie not having an innate desire for communication. Perhaps they do have that and each one in trapped in their own head screaming for anyone to listen. Perhaps what they lack is the ability to listen.
As they hung before me in space like a hundred jewels, I begged them to let me take them elsewhere. They ignored me. Then, en masse, they moved in to land.
. . . I considered just letting them. As I said, without an effective orbital bombardment, I was certain the Ultrawolves would win the inevitable conflict. Plus, there was a chance the wolves would be able to govern the Stravanie. They may be technologically primitive but their society and philosophy is vastly more advanced than what humans have developed.
In the end, I couldn’t. Lots of Ultrawolves would die, and I couldn’t stand by and let that happen just because the Stravanie were too bone headed to surrender. Besides, I still imagined the Stravanie might be willing to listen to me if they grew more desperate. They were out of orbital weapons, and they didn’t have enough fuel to run their warp drives, but that’s a long way from being out of food and power to run atmospheric recyclers. Perhaps I could get them to disarm before I let them land if they were truly facing immediate death. “Ed, stop the Stravanie ships,” I ordered.
“I’m sorry, sir. I can’t do that.”
“What do you mean?”
“My operational parameters prevent halting their descent in the same way they prevented me from halting their interstellar travel.”
It was kind of ironic to learn the armada could have landed at any point had they just been willing to give up on their orbital bombardment. Unfortunately, I wasn’t in the mood. “OK, maybe rotate the shield to block them?”
“I’m sorr…”
“Well let me do it!”
“Give me manual control of the shield position. I’ll turn it for you. Just hold it steady and move it where I indicate.”
There was a long pause and Ed’s simulated voice was shocked when he finally answered, “That will be possible.”
I was more than a little surprised myself. Any manipulations I made to the ships gravitics were vastly riskier than ones Ed made, so by letting me move the planetary shield the Stravanie were being put a more risk than letting Ed do it. Then I realized that’s why I was allowed to do it. Any human directed movement would need a different set of safety parameters than a computer controlled ones. Apparently, that set of safety guidelines didn’t include the protections that had kept Ed from grabbing the armada ships. “Ed, can you grab the Stravanie ships if I’m calling the shots?”
“No sir,” Ed answered and my heart fell, but then he continued, “however, I can give you control of the raw nickel iron and you can grab them with that without tripping any safety protocol.” A hologram appeared in front of me. It showed the Ultrawolf home world, and floating above it my half hemisphere of nickel looking like a shiny cup. I reached out, grabbed onto the nickel, and moved it into the path of the Stravanie ships that had been on a landing approach.
That worked, they broke off and pulled back up into high orbit. Next, I twisted off two big chunks of nickel and had Ed spread them out so they mimicked my hands. I’m not going to lie, that was cool as hell. Suddenly, out the main view port, there were these two giant shiny hands floating in space.
I gave the armada the finger.
Then I started grabbing them. Ed painted the entire star system into the bridge as a hologram. Sun, planets, and most of all the Armada floating in it like little fireflies. Then I ran around the bridge with Ed tracking the movements of my hands snatching up those fireflies. I haven’t had so much fun since I was a kid. Every time I’d get one cupped, I’d have Ed shear off a layer of the metal and I’d leave it floating in a globe that was too big for it to move.
The best part was the globes made it safer for Ed to use his gravitics to move the trapped ships. We were able to embed them in the middle of my giant hunk of metal.
In the end, I was able to catch all but one ship. The fleet dwindled with various other ships providing cover for this one big one whenever I’d snatch at it. When only it was left, it made a warp field and vanished.
I could have followed it, but I assumed it was the head of the Stravanie armada. That meant whoever was on the ship had been keeping everyone else I’d caught as slaves. It had been that being’s bright idea to come here in the first place. I didn’t feel much like saving it. Moreover, I’d pulled its teeth. Without its refinery ship it couldn’t go very far and all alone it couldn’t cause the Ultrawolves much trouble.
. . .
With the Stravanie armada encased in a massive globe of nickel iron it was safe to move them. The metal was sufficient to stop any high energy particles that got through the warp field. So Ed rolled it back up in a ball, and then hauled the whole thing back to the Sol sphere.
Sol Sphere Materials Corporation was more than a little confused by my extra cargo, so they kicked it up to the government. The government considered inventing a crime for what I’d done, and then charging me with it, but then the press got hold of the story. The press decided I was a hero and broadcast that story across human space. That ended my legal trouble. Eventually I got to sell my metal for a fat bonus and start building a recreation of the ancient Greece of legends.
The Stravanie I’d caught were, of course, taken out of my hands. There was a lot of back and forth about what to do with them. We wanted to do better by them than just sending them back to their home world where they’d be made back into slaves. However, we couldn’t make them a part of human society as they weren’t mentally equipped to understand it and live by its rules. Eventually, we sterilized them all and plunked them down on a newly terraformed world where they could live out their lives according to their own desires.
They seem happy enough. Mostly they live alone because the world is big enough for that. Sometimes they do horrible things to one another. Long term, I think something should be done about the whole race. I’m not sure what, but that’s the second thing I’ve been working on: a way of bridging the gap between them and humanity so we can actually benefit one another.
There are only four races in the Milky Way galaxy. Two of them want nothing to do with mankind, and mankind wanted nothing to do with the third. That’s not going to be a workable solution forever. There are 200 billion galaxies in the universe.
submitted by crumjd to HFY [link] [comments]

The Least Bad Option

As a DAO token holder, when I first heard that the DAO had been hacked I thought all the money was permanently gone. That was a bad feeling I felt not just for myself, but for the entire Ethereum community and the hope and promise of The DAO.
When I heard there was a time lock, and soft and hard fork options to fix the problem, the pendulum swung the other way and I once again became overly confident in the tech, and falsely concluded there would be a painless 'fix.' However, thanks to the good work of Emin Gun Sirer, I realized just how many unexplored issues there actually were – technical, legal, social, governanace related, etc. I have posted his thoughts from his NY Meetup PPT below, and would encourage everyone to take a quick look them.
We were talking about this in our Portland Ethereum meetup, and let's face it, mistakes were made by, AND Solidity was not tested enough and ready for roll out, and we all made a mistake rushing ahead. We are all responsible for this mess. We all need to realize there are no good options here. But, if we can work together to find a distributed solution where we all share some of the pain, and come to an agreement collectively, that would be the least bad option.
I first was attracted to the soft fork, but the more I learned about it, I realized it was temporary, would take extraordinary measures and cooperation from miners, which is not their original agreement and not what they signed up to do, and then it would only lock up the tokens, not recover them. Then the hacker joined the white hat draining of the DAO, which suddenly seemed like an endless loop, until we would further have to select white hats who would be allowed to transfer the tokens but nobody else would. It seemed to be a rabbit hole that became more temporary, and more convoluted, requiring an increasing number of actions that violated our core principles the further we pursued it. All of this is bad for the Ethereum Foundation and the future of the Ethereum. The idea of the soft fork quickly appeared a good temporary but bad intermediate and horrible long run option.
I then felt that a hard fork was the only solution, but honestly that was strongly influenced by the idea that a hacker stealing $50m is bad short run, and it's bad long run, so the worst option.
I have been involved with Ethereum for about a year, and must admit I did not come from the Bitcoin community, but from the currency mechanics and payments community, and was originally intrigued only by what might be possible using smart contracts, so that’s what I want to protect, and the real long run value for me. When I spoke with my technical friends who had come from the Bitcoin community, they really, really did not like the hard fork, and felt it would be better to let the hacker walk. I listened to them carefully, and changed my mind.
I also realized that for most people in our community, either hard forking or letting the hacker walk was the worst option, with the other being the second worst option, and soft fork being the third worst option.
From game theory and life, I have learned the longer this goes on, and the closer it gets to the time lock expiring, the higher probability for additional unexpected bad outcomes, unforeseen forks in the road, which I am sure the hacker is working furiously on. The quicker this is resolved, the better for everyone, maybe even the hacker. The soft fork should not lull us into complacency, but be a temporary measure of days and weeks, not longer.
Ultimately, I realized the least bad option is to setup a binary outcome, where we agree to either pay a bounty to the hacker by a specific date, or if he is unreasonable, then go ahead and implement a hard fork. If it doesn't work, at least we tried, and I think the effort will count for something in the long run.
As long as this decision happens before the time lock expires, the hacker knows a hard fork has been agreed to and is definitely coming, and the decision date is firm, the hacker's best outcome is to accept the bounty in exchange for releasing the rest of the ETH. Maybe the hacker would prefer to force the community into a hard fork due to antisocial or anti-Ethereum motives, but money is a powerful motivator. I know, people will not like negotiating or appeasing a hacker, but if we take responsibility collectively for this problem, our problem, that we all created, then this is the least bad solution, for the following reasons:
  1. It avoids the worst (or second worst) option of a hard fork.
  2. It avoids the second worst (or worst) option of the hacker walking away with $50m ETH.
  3. It makes everyone pay a price, so avoids in some measure the moral dilemma problem.
  4. It's the only negotiated solution, which can’t be understated how valuable and important that could be for our leaderless community.
  5. It protects the Ethereum foundation and the miners from having to violate core principles to save's bad coding, or from being tempted to collude with the hacker.
  6. Paying for bounties is part of the software ecosystem, and although the number is big in real terms, it's still just a number.
  7. It solves the problem quickly, and as cleanly as possible. Again, there are no good options.
The key to negotiating is not focusing on what the hacker gets, which in this case will just make you frustrated and angry, but rather focus on what the community gets, the least bad option that maybe prevents the community from splitting into two camps. That alone is maybe the most important thing to me personally, and to others I know. Ethereum is still young, and as a community we have important challenges ahead; let’s put this behind us with minimal damage ASAP. That’s what taking responsibility collectively in practice really means.
If you agree, then we simply need to set a price. I think I read someone else had proposed 5%, which is a relatively painless learning lesson for each of us individually, but a sizable and potentially life changing bounty for the hacker(s). Remember, it won't work unless the incentive to play nice is substantial.
We have all had time to think about this and mull over the options, but now we need to find the will to come together and create a solution, the least bad solution. I say pay the bounty in exchange for returning the DAO tokens, kill the DAO 1.0, and be done with it.
What say you?
Gaming the DAO Emin Gün Sirer Department of Computer Science Cornell University Posted with permission. Thx Emin!
DACs • Decentralized Autonomous Corporations/Orgs are incredibly powerful and promising • A computer program, with its own code and state, that can programmatically manage money flows • The entire behavior of the program is pre-ordained • Brand new era, with brand new functionality
DAO Promise • Automate and eliminate the middlemen • Achieve far higher efficiencies o A hedge fund with 0% overhead? • Self-policing and/or self-arbitrating o Can’t eliminate the legal system, but can handle simple cases • Bring complete transparency to the operation of a company or trust o Insurance o Finance • Killer apps are yet to come...
DAO Unknowns Is it actually possible to build secure, functional smart-contracts? • What about the fine print you see on regular contracts? • What’s in the fine print? • How to form the contract covenant The spirit of the agreement How to resolve disputes • How to modify the contract • How to terminate The DAO, as we will see, messed up almost all of these
Enter The DAO • Usurped the phrase “The DAO” for a specific investment fund • Part kickstarter, part Andreesen-Horowitz o Built by Slock.It, a company originally intended to kickstart an IoT bike lock, but built a kickstarter instead • How it is supposed to work o We all buy into The DAO with ether o The DAO amasses a fund o Contractors come before The DAO with proposals o We all vote on the proposals o If we achieve a quorum, and there is support, proposals get funded o Proposals then return rewards, distributed back out
The DAO Complications • Buying in • Voting • Exiting • Modifying the Contract • Payouts
The DAO Buy-In • 27-day creation phase • Buy in with ether o 1.00 ether for 100 DAO Tokens for 14 days o +0.05 ether every day for 10 days o 1.50 ether for the last 3 days • Additional gains accumulate in “extraBalance” • Why is there a rising scale? • Do “viral features” have any place in sound investments?
The DAO Proposals • Anyone can submit a proposal • Curators pick proposals o Requires a 5 out of 11 signature o 11 members of the Ethereum community, unrelated to SlockIt • The curators’ job description is unclear o Is it to just check identity? o Is it to “protect the DAO”? o The curators are not paid, but they are under substantial legal risk The Voting • Any DAO token holder can vote on a proposal • A proposal is funded if o There is a quorum (sufficient votes) o The majority of the quorum is in favor (voted YES) • Required quorum sizes vary by size of contract o Largest required quorum is 53% • Votes are weighted by a voter’s holdings • But a voter commits The DAO funds (i.e other people’s money) to proposals • Someone who voted cannot exit The DAO
The Exit • Cannot just take money out of The DAO o Why? Because of viral/social reasons • To exit, you need to follow a 62-step process: o Initiate a proposal to make yourself a curator o Anyone can vote YES or NO on this proposal o It will likely fail o You can call splitDAO on a failed proposal o A new child-DAO will be created where you are the curator o You can now propose to withdraw funds, approve it as curator, vote on it, and then take the ether back out • Takes 27+7 days • Takes 27 + 7 days
Upgrades and Rewards • There is no provision to modify The DAO in place o o No kill switch o No security upgrades o Cannot preserve the full state and change code • The extraBalances can only be spent after The DAO has spent an equivalent amount on proposals • Unclear about the intended behavior with regard to • rewards o Inherited into childDAO’s, but not into grandchildren
The DAO Token Markets • DAO tokens can be bought and sold on open markets • Their price will reflect the expected value of future ether flows • Until The DAO funds a proposal, 1 token = 0.01 eth • But in USD terms, the price will fluctuate • The price difference will reflect the uncertainty in the • value of 1 eth, 34 days from now o o E.g. 1 eth = $15 o But 1 dao = $13 • This is a normal consequence of decisions in DAO design
Taking Stock • Why was The DAO designed the way it was? o To avoid legal meddling? o To help fund illegal operations? o To create Ponzis? o “Sunny-day thinking” • Aspirational system design • Does The DAO idea even make sense?
The Questions • Are the crowds even able to pick winning strategies? o Do fund managers really bring 0 value to the world? • Will we ever reach the quorums required? o Most token holders are passive o The risks of “going with the crowd” without voting • Are the mechanisms in The DAO suited for the tasks that need to be carried out?
The Questions • Are the crowds even able to pick winning strategies? o Do fund managers really bring 0 value to the world? • Will we ever reach the quorums required? o Most token holders are passive o The risks of “going with the crowd” without voting • Are the mechanisms in The DAO suited for the tasks that need to be carried out? NO!
The Call for a Moratorium • My colleagues and I were alarmed that The DAO managed to collect 11M eth, $220M USD • The internal mechanisms were broken • We rushed a manuscript that detailed the failures, called for a moratorium • The DAO community was convinced and wanted to upgrade The DAO
The Hack • While we were in a holding pattern, someone emptied out a substantial fraction of The DAO • The hacker took $50+M worth of ether into a child-DAO called the Dark-DAO • Hacker took advantage of multiple attack vectors o A reentrancy bug in the DAO code o Additional tricks to avoid getting his balance reset o He also voted YES on every other split proposal, to reserve the right to pursue everyone who wanted to split • Hide your kids, hide your pets, there is no safe place
The Hack Technicalities
What If The DAO Had Not Been Hacked • It still would have been hacked • It was and is deeply broken • The design of voting mechanisms that capture the will of the crowds is a difficult nuanced task • Everybody on the Internet is an expert at three things: o Economics o Game theory o Distributed Systems • The DAO team, and others like it, full of hubris and the Dunning-Kruger effect, are easy targets
Guiding Principle • DAO-1.0 is irredeemably broken, but let’s examine how one might build DAO-2.0 in light of what we have learned • The DAO voting mechanisms have to be truthful and strategy-proof o Truthful: token holders vote their true opinion o Strategy-proof: token holders fare best by voting their true opinion • The current mechanisms are broken in multiple ways
Affirmative Bias • Every voter has a unique valuation for every proposal o o “Prop #37 will bring in 3% yearly over 3 years” o “Prop #37 will be a net loss, that team can’t pull it off” o “Prop #37 will take us to the moon!” • Ideally, you want everyone to vote their conscience o Positive Expected Value: +EV o Negative Expected Value: -EV • +EV folks are incentivized to vote early • Not so for -EV!!! o Negative votes lock people in • Early votes will be positive, feedback loops work against -EV folks
Stalking • A stalker can vote YES on a split proposal and follow a splitter into the child-DAO • Stalker is not going to be the curator, but he can be the dominant (53%) shareholder in the child • Stalker can keep the splitter from taking out his funds • Stalker can then blackmail the splitter • If the splitter splits again, he loses his rewards from the original DAO • SlockIt claimed that the splitter could counterattack, but do you want to play corewars?
Ambush • A -EV voter has a disincentive to vote, especially if his vote is not needed • So a big bloc of YES votes can come in at the last possible minute to pass a proposal that initially looked unpassable • This commits other people’s funds to a proposal, even though large fraction is against that proposal • Possible remedy: add time to the clock when the vote outcome changes
Token Raid • An attacker can move the price of DAO tokens by o Incentivize people not to split but to sell their tokens o Keep the public from snapping up tokens • She can do this by o Creating social media panic, via stalker attack o Passing a -EV proposal, via ambush attack • The price of tokens will drop, she can short on the way down, and snap up when the attack is over • This is a legitimate manipulation strategy, often seen with penny stocks, except the mechanisms make it easy
extraBalance Raid • Attacker forces people to split from The DAO, which leaves behind the extraBalance amount • Currently at 275,000 ether • DAO tokens should trade at 1.02 • If the attacker scares away 95% of investors, DAO will trade at 2.00
Majority Takeover • SlockIt identified and worried about a majority takeover • A voting bloc of 53+% can fund 100% to a 1 proposal • Curators are expected to guard against this o This scenario is specifically cited • But a voting bloc of 53+% can fund 10 proposals of 10% • No principled way to even define the attack, let alone defend against it o DAO defenseless against Soros-style attacks
Reward Dilution • The DAO issues reward tokens as proposals pay back into the DAO • Akin to dividends • But the reward token math does not follow any accounting principle • In particular, reward tokens can be diluted even after someone has split off from the DAO
Risk-Free Voting • One of the many “race conditions” • Investor votes YES on a proposal, committing funds • Then invokes “unblockMe” before the proposal is executed, and splits off • This allows her to commit the DAO to a proposal without committing her own funds • An attack amplification vector
Concurrent Proposal Trap • Voting on any proposal commits the voter until the end of the voting period • Attacker poses a proposal o We have seen “do you believe in God?” for 0 ether • Everyone who votes is banned from splitting until the end of the voting period • Attack amplification vector: push an incendiary proposal with a long voting period, then launch short-fuse attack
Independence Assumption • All of the discussion until now assumes that all proposals are independent • Yet in real life, proposals are linked o Funding a cluster of proposals might yield much higher returns than funding them individually • Not an attack, but undesirable • This can yield strategic behavior (i.e. people voting down worthy proposals) even when everyone means well
What Have We Learned • The DAO is a fantastic experiment • The experiment has been a huge success • Enormous demand for smart contracts • The Ethereum core has some (well-contained) issues that need to be fixed o The design of a secure smart-contract language is very different from the design of a web-programming language • The DAO is a hot mess
Methodological Issues • Why was The DAO designed the way it was? o To avoid legal meddling? o To help fund illegal operations? o To create Ponzis? • Carefully thought-out viral features • Common behaviors were purposefully made difficult • “Sunny-day thinking,” aspirational ideas about best case behaviors • Irresponsible design, no safety mechanisms • Flawed methodology
Takeaways • Can we build a $1.2B ecosystem, while spending $0 on basic research and science of smart contracts? • How do we build and vet trustworthy smart contracts?
IC3, Initiative on Cryptocurrencies and Smart Contracts
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