No, you could get totally screwed going long 10:1 if the price drops even a bit before it skyrockets. Even 2:1 isn't what you want, plus that would require more hedging capital. You need an option to buy coins at or near the current price in 5 years time. That's not going to be easy to get because anyone who will promise do that for you won't hold them or be able to afford coins if they skyrocket or else they are holding them because they expect them to go way up and will charge you a lot.

For your case I would borrow dollars with an agreement that you can pay them back with bitcoins at the market rate. I don't think anything else is going to match up perfectly with what you want.

Pay your partner the bitcoins. He keeps them as collateral and lets you run the company. He agrees to sell the bitcoins back at 5 each if it goes up, BUT you have to give him equity back for the difference. You pay him dollars out of the earnings of the company over time. If bitcoin skyrockets then he will sell the bitcoins to you and get equity, but you can pay your debt. If bitcoins stay the same or become cheaper then you buy them on the market. If the company tanks you have to work for him to earn back your bitcoins!

If you just want to guard against month to month spikes, you could head over to MPOE http://polimedia.us/bitcoin/options.php and buy call options - he's offering 1,2,3 month maturities. The ordering system is not simple

Bitcoinica won't work as well as you'd like - the position is a leveraged one in which you never take delivery of actual coin - you'd profit on the rise of coin, but have to buy coin then, costing you at least the difference in the spread at the time of position exit & exchange to BTC. The 10:1 leverage option doesn't allow for the size account you'd need ($2k max)

There might be a few people around who'd talk about options with later maturity dates. If I were going to work out an options contract long term, I'd need guarantees that the counterparty had the coin locked up until the maturity date (i.e. a long term CD with a reputable bitcoin banker)

Because there's so much uncertainty about the long term exchange rate, 3mo options may be all you'd really want - your counterparty's risk on a longer term option would likely increase the premiums too much.

Seems another way to hedge the risk (partially) is by shopping for inexpensive mining contracts/bonds (lol, while still reselling your hash power) If you can pay for this in USD you might have it made

EDIT: but if you have experience trading, it seems that you could do well to start a $2K USD funded account, w/ a long position with minimal initial capital risk, build that position on dips & rallies (as the position show more profit, add on to it, using profit equity as additional risk capital - as long as you limit the risk on the position to say 10% of capital, you can take a lot of downside, which doesn't hurt you too much, and with only a small amount of actual risk, you have little chance of force liquidation. When the account size grows, you'll have to cash some or all of the position out, and go to 5:1 until Bitcoinica has more capital to offer as leverage. The less you touch that trade the better, I'd think

I actually think bitcoinica could work very well for an experience person, using limited risk, and a very long term strategy on a long position. you can't hedge your whole loan this way, but it would help.

Yes it does, you can create as many accounts anonymously as you like. The problem is that there is a near 100% chance he will get zhoutonged and lose all his funds on a dip down (you get liquidated at maybe 6% down from your base price).

I think taking a big very long-term loan in Bitcoins is a bad idea too, I can’t imagine there being any way to hedge against a price rise efficiently.

Then you simply wouldn’t be leveraged 10:1. It’s just the ratio of your reserves and the margin you use for your position, nothing else. You can’t use margin as a reserve on your account.

The leverage setting only determines your maximum allowed leverage.

Correct me if I understood something horribly wrong.