Users need to first deposit from their wallet to the trading account (smart contract) on the platform in order to start dual investing.
There are two types of Dual Investment financial products: "Upward Exercise" and "Downward Exercise".
(1) Upward Exercise: If the Settlement Price is higher than the Strike Price, then the product will be "exercised".
- Settlement Price ≥ Strike Price, then exercised;
- Settlement Price < Strike Price, then it will not be exercised.
(2) Downward Exercise: If the Settlement Price is below the strike price, then the product will be "exercised".
- Settlement Price ≤ Strike Price, then exercised;
- Settlement Price > Strike Price, then it will not be exercised.
Regardless of the Underlying Asset, if the product is not exercised, the subscriber will receive a return on their investment in the form of the currency they invested. If the product is exercised at Delivery Date, the subscriber will receive a return on the investment in the form of the alternative currency.
Each subscription has a specified Delivery Date. The average Spot Price of the last 30 minutes before 16:00 (UTC+8) on the Delivery Date will be used as the Settlement Price.
The Spot Price is sourced from ChainLink.
1. When a product is "exercised", the subscription amount and yields will be swapped at the strike price in the alternative currency.
Upward Exercise: Yields = (Subscription Amount * Strike Price) * [1 + (APY % * Period (days) / 365)]
Downward Exercise: Yields = (Subscription Amount / Strike Price) * [1 + (APY % * Period (Days) / 365)]
2. When a subscription is "unexercised", the subscription amount and yields will not be transferred into the alternative currency and the user will receive the currency they invested.
Yields = Subscription Amount * [1 + (APY% * Period (days) / 365)]
Yields will be automatically credited to the user's account within 24 hours of settlement.
APY = Return Ratio / (Delivery Date - Purchase Date) * 365*100%
APY is constantly changing and is obtained in real time, depending on the strike price, the remaining time to delivery date and the volatility of the market price. For example, the lower the strike price, the more volatile the market price, as well as the higher the APY.
When a user successfully subscribes to a Dual Investment, it means that the APY at the time of placing the order is settled and it will not change until the delivery date.
- 1.After a successful subscription, the subscription cannot be withdrawn.
- 2.Redemption in advance is not supported for the time being and users can only receive returns after the delivery date.
There are two types of ordinary options: call options and put options. The buyer of a call option purchases the right to buy an asset from the seller at a certain time. The buyer of a put option purchases the right to to sell the asset to the seller at a certain time.
For the buyer and seller of an option, the benefits and risks of buying and selling options are not symmetrical. In the case of a call option, for example, the horizontal axis (S) is the price of the underlying asset, the vertical axis (π) is the resulting gain or loss, C is the margin of the call option, and K represents the strike price of the option. Regardless of how the price changes, the option seller will certainly receive the margin (C), but this is the maximum gain the seller can receive. If the price rises too much (S>K+C), the seller will bear a loss, which corresponds to what is known in the market as long-tail risk.
In essence, a user buying a Dual Investment is actually selling an option to the platform.
The ROI of a Dual Investment is calculated by the system in real time based on market movements. However, after the user buys Dual Investment, the yield is settled and will not change. This part of the amount is equivalent to the margin (C) that the user receives for selling the option.
Subsequently, the price of Bitcoin / USDT will fluctuate. At settlement, if the Bitcoin price (settlement price, i.e. S) is higher than the strike price (K), it will be settled in USDT. This is equivalent to a call option where the buyer chooses to exercise the option and the seller sells their BTC to get USDT (similar to getting cash in an option).
However, there are still differences between Dual Investment and regular options. Selling a regular option does not require any deposit. But for Dual Investment, users are required to deposit BTC or USDT in advance. This "deposit + option" model is actually closer to what is known in traditional finance as "Short Straddle Options".
Therefore, by buying Dual Investment, the user is actually selling a call option and a put option with the same expiry date and same amount to the platform.
As investors can make a profit in both scenarios where the settlement price is above or below the strike price, this strategy is known as straddling.