Huobi Global’s dual investment product enables you to earn yields on your token holdings regardless of market conditions. Think of it as a step beyond passive income products like Huobi Earn — it requires you to make trades based on future market movements.
As such, if you want to monetize your market sentiment while hedging market prices with additional interest, Huobi Global’s dual investment product is worth exploring. This lesson will show you how it works and why you might want to use it for additional revenue and profits.
Read the following lessons for more crypto knowledge:
Dual investment terminology
Before going any further, it’s important to first familiarize yourself with the terminology associated with dual investment so you can understand the product and open a contract.
Expiry date: The date on which you can redeem the tokens with accumulated daily interests.
Product duration: The total time left before a contract’s expiry date.
Strike price: The pre-determined fixed price level that defines which settlement currency in which you will receive your payment.
Settlement price: The price on the expiry date. Together, settlement price and strike price determine if you will be able to sell at the higher price or buy at the lower price on the expiry date.
BTC Index: The token prices on Huobi Futures (calculated every six seconds).
Annualized percentage rate (APR): The APR refers to the reward you would earn in a year after accounting for interest rates. If, for example, the APR is 154.36%, your estimated daily return would be 154.36% ÷ 365 days = 0.31%.
Deposit currency: The token you must use to open a dual investment contract.
Alternate currency: The token you will receive if the settlement price surpasses the strike price.
What is dual investment?
Dual investment on Huobi Global can be considered a cross between ‘active’ investment and ‘passive’ yield generation. Firstly, it lets you capitalize on your prediction of future price movements as you have to decide if you want to sell your tokens for a higher price or buy tokens at a lower price. Secondly, it contains a token deposit that earns you an enhanced APR based on two assets, hence the name ‘dual investment’.
You can choose one of two routes in dual investment — sell higher or buy lower than the current market price. The tokens you get back from dual investment will depend on your investment’s outcome on the expiry date.
If you decide to sell higher (in which case, the market price must increase) and the market price reaches the strike price on the settlement date, your deposit currency will be sold for the alternate currency at the strike price. Additionally, you will receive daily interest for holding the contract.
But of course, your guess may not always be correct. In case the settlement price doesn’t reach the strike price, you’ll get back your deposited tokens and earn a yield on them.
By the same logic, if you buy lower (in which case, the market price must decrease) and the settlement price lowers to match to the strike price, your deposit currency will be converted into the alternate currency but you will still be rewarded with a daily yield. And if the settlement price does not meet the strike price on the expiry date, you’ll still get your deposited tokens back, plus yield.
How selling higher and buying lower works
You can access Huobi Global’s dual investment platform here and follow the upcoming steps.
Huobi Global’s dual investment platform currently supports BTC, ETH, AVAX, SOL and LUNA. You can invest using a token of your choice, or using USDT with a similar contract.
If you choose BTC, for instance, you can select either [Invest BTC] or [Invest USDT]. The first option allows you to invest with the token itself and sell high. The second option is suitable for investing when you want to buy low.
If you want to sell high, you should sell the tokens you own. If you want to buy low, you should use USDT to buy a specific token at a lower price.
1. Selling high
For this example, we’ll use the BTC-USDT-Dual option with 168.28% APR that expires on 11 May 2022. At the time of writing, there are 16 hours (product duration) until the expiry date, and BTC’s price is around 31,100 USDT.
If you invest in the BTC-USDT-Dual option (outlined above), you will want the settlement price (i.e., the price in the expiry date) to surpass the strike price of 32,000 USDT.
Let’s say you deposit 1 BTC. If the settlement price exceeds the 32,000 USDT strike price, the system will sell the 1 BTC you deposited for 32,000 USDT, and you will earn an additional 85.322 USDT for the holding period. On the other hand, if the settlement price is below 33,000 USDT, you will get your 1 BTC back with the same yield.
When selling high, the goal in dual investing is to achieve the first condition — for the settlement price to surpass the strike price.
2. Buying low
For this example, we’ll use the USDT-BTC-Dual option with 146.32% APR that expires on 12 May 2022. At the time of writing, there are 18 hours, 24 minutes 59 seconds until the expiry date, and BTC’s price is around 29,700 USDT.
In this case, if you invest in the USDT-BTC-Dual option (outlined above), you will want the settlement price (i.e., the price on the expiry date) to be below the 28,000 USDT strike price.
If you invest 10,000 USDT and the settlement price is below the strike price, the system will use the 10,000 USDT you invested to buy 0.357142 BTC for you, and you will yield an additional 20.302 USDT for the holding period.
However, if the settlement price is higher than 28,000, you will get your 10,000 USDT back with the same additional yield.
The goal in the dual investment when buying low is to achieve the first condition — for the settlement price to be below the strike price.
What risks does dual investment present?
Although dual investment may seem devoid of risk, there are risk factors you should consider before investing. Firstly, remember that you cannot cancel subscriptions. If you deposit your tokens using a certain contract, you can’t redeem them before the expiry date.
There is also the possibility that you may have to sell relatively lower or higher than the market price. If you sell high, this happens if the market price on the expiry date rises far above the strike price. If you buy low, this happens if the market price drops far below your target price for buying.
For more information about dual investment, visit Huobi Global support.