On Oct. 30, someone (a single trader or small group) bought 16,000 contracts of Jan. 29 expiry call options at the $36,000 strike for 0.003 bitcoin (BTC, +11.36%) per contract, according to data shared by Deribit. The initial investment or total purchase cost was 48 BTC, or roughly $638,400 as per bitcoin’s price back then. 

At press time, the $36,000 call option is drawing a price of 0.1060 bitcoin on Deribit. At current prices, which haven’t changed much in the past 24 hours, and assuming the position is still active, the trader appears to be sitting on a gain of 1,648 bitcoin or $58.2 million. 

Here is how we arrive at the net return:

That’s a 9,118% return on investment. The trader would have made significantly less money in the spot market because bitcoin is currently up over 150% from the Oct. 30 average of around $13,700.

The staggering four-digit return is far greater than what veteran trader George Soros’ reportedly earned in September 1992 when he shorted the British pound. As recalled in Investopedia, Soros took a short position worth $10 billion and made $1 billion as the pound plunged 15% versus the German mark and 25% against the U.S. dollar. 

There were others, of course. The 86% return generated by trader Louis Bacon in the 1990s by buying oil and selling stocks in anticipation of Iraq’s invasion of Kuwait also looks meager compared to the 9,118% gain generated by the bitcoin options trade. As such, one may feel tempted to call the bitcoin options trade one of the most epic bets of all time. However, traditional market veterans suggest otherwise. 

“Interesting [trade], but tough to know really about trade success … [W]inning a lottery ticket is a great return on investment, too,” Marc Chandler, chief market strategist at Bannockburn Global Forex, told CoinDesk in an email. Chandler has 30 years of experience working in the global capital markets and is the author of the book “Making Sense of the Dollar.” 

Chandler’s lottery analogy makes sense because back in October the $36,000 call was deep out-of-the-money (spot price trading well below the strike price) and was trading at a marginal premium of 0.003 bitcoin. 

When a trader buys options, be it call or put, the maximum loss is limited to the extent of the initial price (premium) paid, and maximum profit is unlimited. That’s because, theoretically, the sky’s the limit for any asset’s price. Hence, buying cheap out-of-the-money options is akin to buying a lottery ticket. 

That does not necessarily mean the options trader merely gambled with 48 BTC, or $683,000, by taking a long position in the $36,000 call in October. 

The fact that the position remained active well after the cryptocurrency set new record highs above the December 2017 high of $19,783 in mid-December indicates the trader was expecting a meteoric rise. Amateur traders gambling with deep OTM options usually take profits quickly. 

“This trade may be added to the trading legends in the crypto space, like the guy who bought a pizza [with] bitcoin back when,” Chandler quipped.

Also, this trade can’t be compared to some of the best traditional market trades, given that the currency/commodity/equity markets are way bigger in terms of market capitalization and trading volumes than the entire cryptocurrency market. 

“Despite all the furor, I personally still see bitcoin as a very niched, highly speculative and illiquid market. Even if the liquidity is better than it used to be, I don’t see it as FX at all,” Marc Ostwald, chief economist at London-based ADM Investor Services, said.

Open interest, or the number of open positions, in the $36,000 call expiring on Jan. 29 fell by 9,500 to 5,000 on Tuesday. 

According to some observers, the sharp decline has resulted from the unwinding of the long trade taken in October. “This is presumably from our whale friend who had bought them back” in October-November, Swiss-based data analytics platform Laevitas tweeted early Wednesday while taking note of the drop in the open interest. 

Bitcoin hasn’t moved much in the past 24 hours. Thus, we can assume the trader cashed out with a return of around 9,000% on Tuesday.