Move Contracts
Instrument designed to offer a similar payoff structure to an options straddle, a strategy involving the purchase of both call and put options. It provides protection against volatility in either direction — whether the underlying asset's price goes up or down sharply, the value of the Move Contract increases.
Instrument Design
A Move Contract is essentially a packaged portfolio of derivatives that includes call and put options.
Call Options: These options give the holder the right, but not the obligation, to buy the underlying asset at a predetermined strike price upon maturity. The value of a call option typically increases if the price of the underlying asset rises.
Put Options: These provide the right, but not the obligation, to sell the underlying asset at the strike price upon maturity. Their value generally increases when the underlying asset's price falls.
By holding both call and put options on the same underlying asset with identical strike prices and maturity dates, traders can capitalize on any significant price movement before the options expire, effectively hedging against volatility.
Move Contracts are issued through Green Candle's liquidity pools, targeting markets with high liquidity and designed with daily maturity periods to cater to short-term trading strategies. Move Contracts are settlement instruments, which means that all mutual settlements under contracts are made automatically on the expiration dates.
Move Contract’s Premium
The premium (price) of a Move Contract is influenced by multiple factors, commonly referred to as the "Greeks" in options trading. There are three key factors among "Greeks": (a) underlying asset’s price, (b) time to maturity date, (c) implied volatility.
As described earlier, the movement of the underlying asset's price directly impacts the premiums of the respective call and put options within the Move Contract.
There is a direct relationship between the time remaining until the contract's maturity and its price. The longer the duration, the higher the premium, as the extended timeframe reduces risk for hedge sellers and offers more opportunity for price fluctuations.
Implied volatility represents the expected range of price movement for the underlying asset over a given period. It is calculated dynamically based on historical price movements and plays a crucial role in determining the option's pricing.
Green Candle’s Derivatives Engine continuously evaluates and updates Move Contract prices using both internal data and external market feeds to reflect real-time conditions accurately.