Product trading tutorial - American standalone options

1. About American Standalone Options

To continue to provide users with more comprehensive and convenient trading products, Huobi Warrant has launched standalone options. This product greatly reduces the barriers to entry for using option products, and features simplified trading process, a smoother experience, and better liquidity. Huobi Warrant has two types of American standalone options, namely call options and put options. Compared with European option spreads, American standalone options allow the buyer to exercise their option on any trading day before its expiration, giving them more flexibility in terms of exercising. Holders of American standalone options can avoid certain risks. In addition, they can choose to exercise them on any trading day making them more flexible,.

 

2. Advantages of American standalone options

In addition to flexible trading, American standalone options also have three major advantages: high yields, small losses, and no liquidation. At the same time, the unique OTC trading mechanisms of Huobi American standalone options solve the liquidity problems that other option products face under special market conditions. Each option order will be executed in real-time through Huobi Warrant.

 

3. Product Type

Call options

Huobi Warrant does not perform physical delivery. Holders of American call options can benefit from rises in the underlying price. In addition, users can exercise them in advance to lock in profits.

 

Put options

Huobi Warrant does not perform physical delivery. Holders of American put options can enjoy the benefits from the fall of the underlying price. In addition, users can exercise them in advance to lock in profits.

 

product name

American standalone options

Product Type

Put/Call

Transaction currency

BTC, ETH, DOGE

Related assets

BTC/USDT, ETH/USDT, DOGE/USDT.

Buying and selling direction

Buy

Expiry Date

the expiration date set by the user

Stike Price

To set strike price

Par Value

Buy-in denomination

Breakeven price

Profit line, the part where the index price exceeds the price is profit

Settlement price

Product expiration Huobi contract index price

Delivery method

Difference Settlement

Expenses payable

Option premium, also known as premium, is the amount the option buyer spends to purchase an option

Return

If the settlement price is more than the strike price, the expected exercise return = the quantity * (settlement price-strike price).

If the settlement price is less than the strike price, the expected exercise return = the quantity * (strike price-settlement price).

ETH/USDT, DOGE/USDT can only be purchased through APP.

 

4. Trading Guidelines

Mobile app version: When a user buys an option, the strike price reflects the current market index. In this case, they only need to select the product expiration date (minimum five minutes, maximum six months), option type (call/put), and fill in the quantity to quickly purchase American standalone options.

 

Currently, users can buy options for BTC/USDT, ETH/USDT, and DOGE/USDT.

Website version: Currently, options for BTC/USDT are supported. Users can set the exercise price and product expiration date independently.

 

As shown in the figure below, client A predicts that BTC will exceed USD 52,000 on September 4, 2021, but when it will peak, so he/she spends USD 201.896 to buy a call option of 1 BTC. On September 4, if the spot price of BTC is higher than USD 52,000, then the user’s net profit is the BTC index at expiration - exercise price 52000 - premium 201.896. If the BTC spot price at expiration is less than USD 52,000, the option will expire with no money returned to the user, and the user only loses the option premium of USD 201.896.

 

5. Settlement rules (in USDT)

If the settlement price is more than the strike price, the expected exercise return = the quantity * (settlement price-strike price).

If the settlement price is less than the strike price, the expected exercise return = the quantity * (strike price-settlement price).

 

Note: The product can be exercised before the expiration date. If the product is not exercised before the expiration date, the settlement will be carried out automatically in accordance with the system rules. In other cases, there is no refund.

 

For example:

If the current BTC price is US$48,600, client A is bullish on BTC and believes that “it will be higher than 50,000 in one day, so he/she buys an American call option for 1 BTC (with a strike price of 50000) that expires in one day.

 

Scenario 1: If the liquidation price/expiration settlement price is $49,500, the estimated exercise return = quantity * (exercise price-settlement price)=1*(50000-49500)=500

 

Scenario 2: If the liquidation price/expiration settlement price is greater than US$50,000, assuming that it is US$50,500, the estimated exercise return = order quantity* (exercise price-low exercise price)=1*(50000-49000)= 1000

 

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Huobi Global reserves the right in its sole discretion to amend or change or cancel this announcement at any time and for any reasons without prior notice. The above is for information purposes only and Huobi Global makes no recommendations or guarantees in respect of any digital asset, product, or promotion on Huobi Global. Prices of digital assets are highly volatile and trading digital assets is risky. Please read our Risk Reminder text here.