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What are Move contracts on FTX and how to make money on them?
Move is FTX’s futures contracts. The price of MOVE displays the value of the absolute change in the price of the basic asset from the moment of launch of the contract.
The specification of MOVE contracts includes:
- Basic asset – an asset at the price of which the price of the contract is calculated, in this case – bitcoin;
- expiration time – the date and time when the exchange closes the contract and all positions on it;
- Strike – the price at which the exchange executes the contract.
The FTX exchange fixes the Move contracts at 0:00 (UTC) or 03:00 Moscow time.
How do Move contracts work on FTX?
The cost of the contract is growing when the difference between the current price of an unlimited Bitcoin futures (BTC-perp) and its price at the time of launch of MOVE and fixing the price of a fear. When the price difference is reduced, the cost of move is falling.
Example: When starting a daily contract, unlimited Bitcoin futures cost $ 55,000. Move price:
- will increase by $ 1000 if bitcoin reaches $ 56,000;
- will grow by $ 1000 if bitcoin falls to $ 54,000;
- will decrease to $ 0 if bitcoin costs $ 55,000.
The second example: May 19 Bitcoin price fell from $ 43,000 to $ 30,000. At the same time, the price of a weekly contract Move increased from $ 7,000 to $ 18,000:
Why is Move gets getting more expensive when the price of bitcoin falls?
The principle of operation of MOVE is based on the Optional Strategy Staddle. When buying a contract, the trader receives options for Put (PUT) and Call with the same striking. Potential profit from the purchase of Put and Collo-Option is not limited. In this case, the possible loss of the trader is equal to the cost of options at the time of purchase.
If the price of bitcoin changes, then the profit on one option will block the loss in another way. The size of the trader’s profit depends on the absolute difference between the striking and the price of bitcoin at the time of expiration.
If at the time of expiration, bitcoin is traded at a price of a fear, the trader incurs losses.
Due to the limiting maximum loss and combination of options, the cost of the MOVE contract is growing even during the fall of bitcoin prices.
Example: Bitcoin costs $ 56,000. You buy a daily move contract with a strip $ 56,000. Move price:
- will grow by $ 4000 if bitcoin falls to $ 52,000;
- will increase by $ 4000 if bitcoin reaches $ 60,000;
- will fall to $ 0 if the price of bitcoin remains at $ 56,000.
What types of MOVE contracts are FTX?
FTX is trading day, weekly and quarterly contracts for Bitcoin.
Contract tickers display their type and expiration date:
- BTC-MOVE-MMMDD – daily contract, where MM is a month, DD – day. BTC-Move-0512 expires on May 12;
- BTC-MOVE-WK-MMDD – A weekly contract, where MM is a month, DD – day. BTC-Move-WK-0521 expires on May 21;
- BTC-MOVE-YYYYQQ – quarterly contract, where Yyy is a year, QQ is the quarter. BTC-Move-2021Q4 expires at the end of the 4th quarter of 2021.
How Move contracts are traded?
The initial cost of the next MOVE contract depends on the volatility of the current contract. The higher the volatility of the basic asset, the more expensive the contract when opening trading.
Move contracts are traded in two periods:
- Linear futures for the implied volatility of bitcoin. The period ends when fixing the price of a fear.
- Futures for the absolute range of prices. The period ends with the expiration of the contract.
An example with a daily contract BTC-Move-0526:
- From 25 to 26 May, the contract is traded as linear futures.
- From May 26 to 00:00 (UTC) May 27, the contract is traded as Staddle.
What are the conditions for the trading of MOVE contracts?
The cost of the BTC-Move contract is equal to the price of one bitcoin. The minimum position size is 0.01% of the current cost of MOVE.
When trading move, you can use market, limit and stop-orders with a shoulder up to 100x. The margin works the same as when trading an unlimited futures BTC-Perp.
Move trading commission ranges from 0.07% to 0.04%, depending on the monthly volume of user transactions. When the Tecen FTT, the Taker’s commission is reduced and staiking is reduced to 0.015%.
How to earn on move contracts?
If the price of bitcoin varies relative to the fear, the cost of Move is growing. If the price of bitcoin returns to a fever, the cost of move is falling.
Example of earnings by buying: daily contract move costs $ 2500. The price of a fear is $ 55,000, the price of bitcoin is $ 55,000. You buy one move. At the time of expiration of the contract, the price of bitcoin falls to $ 54,000, and the cost of MOVE grows to $ 3,600. Your profit is $ 1000.
An example of earnings on sale: daily contract Move costs $ 2000. The price of a fear is $ 54,000, the price of bitcoin is $ 54,000. The price of bitcoin grows to $ 55,000, and the cost of MOVE – up to $ 3000. You are selling one move. Later, the price of bitcoin drops to $ 54,500, and the Move price decreases to $ 2500. Your profit is $ 500.
What are the risks when trading move contracts?
When buying move, the maximum loss is limited by the cost of the contract itself. In the worst case, the trader will lose the amount he paid for Move. FTX does not eliminate a long position if the trader is more than the cost of purchased contracts.
When selling move, the maximum loss is not limited. FTX can eliminate a short position with a lack of margin.