Every week, a new weekly Ethereum Warrant is created. The Call Warrant grants the right to purchase 0.1 ETH at the Strike Price upon weekly expiration. The Put Warrant grants the right to sell 0.1 ETH upon the weekly expiration. All Warrants are cash settled and automatically exercised.
Each Warrant has a capped maximum gain (from the purchaser's perspective) and, reciprocally, a determined maximum loss (for the writer). These caps are set to be 50% of the Warrant's Strike Price.
For example, if the strike price is 200, an expiring Call Warrant grants the purchaser the right to buy 0.1 ETH for 20TUSD. If the value of the ETH Index is 250, the purchaser of the Warrant will receive (250 - 200) * 0.1 or 5 TUSD. If the value of the ETH index is 350, the purchase of the Warrant receives only (300 - 200) * 0.1 or 10 TUSD as the cap for the Warrant would be set at 300.
On the put side, if the Strike Price is 200, the cap is set to 100. Even if the ETH Index were to fall to 25 at expiry, the purchaser of the Warrant would only receive (200-100) * 0.1 or 10TUSD.
Put another way, the caps set the maximum value of each Warrant contract at 50% times the Strike Price.
The Strike Price for each new Call and Put Warrant is set to the Final Settlement Value of the proceeding week's Warrants rounded to the nearest whole number. For example, if the Final Settlement Value was 202.44, the new Call and Put Warrants would have a Strike Price of 202.
Naming and Symbol Conventions
|Name||Ethereum 18/01/23 210 Call|
All symbols follow the syntax: <ETH><YY><MM><DD>('C' for Call, 'P' for Put)<Strike>
Cash settled in True USD; expires on the next Wednesday following listing at 10:00:00 AM CT.
Final Settlement Value
The Final Settlement Value is the value of the ETH Index at 10AM on Wednesday on the Settlement Day.
The ETH Index is calculated in real time by taking prices from Binance, OkEx, Huobi, Coinbase, Gemini, and Kraken. For reference pairs denominated in Tether, the pair is normalized by the USDT Index value. On each exchange, we calculate the Adjusted Mid Price by computing the simple average of the Liquid Bid and Liquid Ask as that time. The Liquid Bid and Liquid Ask are the prices at which there is liquidity to sell (or buy) 10 Ethereum at that point in time in the exchange's order book. We drop the highest and lowest value, so the remaining 4 exchange each comprise 25% of the index value.
If one or more of the price sources is not available, the ETH Index is derived from 3 out of 5, 2 out of 4 or 1 out of 3 of the remaining price sources, always leaving highest and lowest value out of the index. If there are only two available price sources, each comprise 50% of the ETH Index. When only one source remains, that source is the entirety of the ETH Index value.
The USDT Index is calculated identically as above with the price sources being Binance, OkEx and Kraken. For calculation of the appropriate TUSD/USDT, the mid is calculated against a Liquid Bid and Liquid Ask satisfying a 10,000 USDT requirement.
European-style with automatic exercise; options are executed, if applicable, against the Final Settlement Value on the Settlement Day (Wednesday 10AM CT).
|Expiration Date||January 23th, 2019 10:00:00 AM CT|
|Listing Date||January 16th, 2019 11:00:00 AM CT|
|Trading Hours||11:00:00 AM CT - 10:00:00AM CT (T+1)|
|Contract Value||0.1 ETH|
|Tick Size||0.1 TUSD|
|Low Cap Price||61 TUSD|
|High Cap Price||183 TUSD|
The purchaser of a Warrant need only post the premium needed to pay for the Warrant. A seller (or writer) of the Warrant must post the difference of the premium and the maximum possible loss. For example, if the Warrant is the ETH181026C210, the maximum loss is (315 - 210) * 0.10 or 10.5 TUSD. If the Warrant premium is 1 TUSD, the purchaser must tie up 1 TUSD of capital, while the seller must tie up 9.5 TUSD of capital. Upon expiration, if the Warrant expires worthless, the seller's capital is unfreezed and the seller receives the 1 TUSD from the purchaser.