Every week, a new weekly Ripple Warrant is created. The Call Warrant grants the right to purchase 100 XRP at the Strike Price upon weekly expiration. The Put Warrant grants the right to sell 100 XRP 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 0.50, an expiring Call Warrant grants the purchaser the right to buy 100 XRP for 50TUSD. If the value of the XRP Index is 0.55, the purchaser of the Warrant will receive (0.55 - 0.50) * 100 or 5 TUSD. If the value of the XRP index is 0.95, the purchaser of the Warrant receives only (0.75 - 0.50) * 100 or 25 TUSD as the cap for the Warrant would be set at 0.75.
On the put side, if the Strike Price is 0.50, the cap is set to 0.25. Even if the XRP Index were to fall to 0.10 at expiry, the purchaser of the Warrant would only receive (0.50-0.25) * 100 or 25TUSD.
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 cent. For example, if the Final Settlement Value was 0.512, the new Call and Put Warrants would have a Strike Price of 0.51.
Naming and Symbol Conventions
|Name||Ripple 05/10/18 210 Call|
All symbols follow the syntax: <XRP><YY><MM><DD>('C' for Call, 'P' for Put)<Strike>
Cash settled in True USD; expires on the next Monday following listing at 10:00:00 AM CT.
Final Settlement Value
The Final Settlement Value is the value of the XRP Index at 10AM on Monday on the Settlement Day.
The XRP Index is calculated in real time by calculating the median Adjusted Mid Price of:
- Binance XRP/USDT combined with the Binance TUSD/USDT to normalize to True USD
- Huobi XRP/USDT combined with the Binance TUSD/USDT to normalize to True USD
- OKex XRP/USDT combined with the Binance TUSD/USDT to normalize to True USD
The XRP Index is calculated in real time by taking prices from Binance, OkEx, Huobi, 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) 5,000 Ripple at that point in time in the exchange's order book. We drop the highest and lowest value, so the remaining 2 exchange each comprise 50% of the index value.
If one or more of the price sources is not available, the XRP Index is derived from 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 XRP Index. When only one source remains, that source is the entirety of the XRP 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 (Monday 10AM CT).
|Expiration Date||January 28th, 2019 10:00:00 AM CT|
|Listing Date||January 21st, 2019 11:00:00 AM CT|
|Trading Hours||11:00:00 AM CT - 10:00:00AM CT (T+1)|
|Contract Value||100 XRP|
|Tick Size||0.01 TUSD|
|Low Cap Price||0.2 TUSD|
|High Cap Price||0.4 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 XRP181026C050, the maximum loss is (0.75 - 0.50) * 100 or 25 TUSD. If the Warrant premium is 1 TUSD, the purchaser must tie up 1 TUSD of capital, while the seller must tie up 24 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.