P/L Calculations

This page details some trade scenarios to illustrate how we calculate profit or loss on trades.

Conditions:

• We simulate the outcome of a hedge, we don't facilitate traditional hedging procedure.

• Strike Price

• Underlying Value of tokens is the value of tokens * token price in pair currency

• Cost is premium and always in the paired currency of the underlying asset

• No Risk-Free Interest Rate charged

• No Implied Volatility imposed

• Tokens are lockedInUse when a trade is written, or when Taker takes trade.

LockedInUse

Call Options

Scenario:

Trade Creation

• Writer, Capo, owns 1000 GPU tokens.

• He is unsure about the price going up further the next 30 days.

• Capo Deposits 1000 GPU to the Xeon Protocol Vault.

• Capo Writes a Call Option using 100 GPU tokens as underlying asset. Cost/premium 0.1 WETH. Duration 30 days. Strike price 2x from now, or strike value 2 WETH.

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Trade Taking

• Taker, DegenX, wants exposure to GPU tokens and sees Capo's OTC trade on the Silkroad.

• DegenX is sure GPU will pump in the next 30 days.

• Current market value of 1000 GPU tokens is 1 WETH.

• Strike value of 1000 GPU tokens is 2 WETH.

• DegenX Deposits 0.1 WETH to Xeon Protocol Vault.

• DegenX Buys Capos GPU Call Option, his 0.1 WETH is credited to Capo instantly as Cost. Capo can immediately withdraw it as extra liquidity to buy more tokens.

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Trade Running

• GPU soars in price 4X.

• Current market value of 1000 GPU tokens is now 4 WETH.

• Strike price or value is now half of the market value.

• Expiry or trade duration is up.

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Trade Settlement

• Capo owes DegenX

$$4 ETH - 2 ETH = 2 ETH$$

Owed = Start Value - Strike Value.

Start Value = Token Price * Token Amount

Strike Value = Strike Price * Token Amount

• Equivalent in GPU

$$2ETH / GPU price Per Token$$

• Settlement function debits owed Profit equivalent in GPU tokens from Capo, credits it to DegenX. The difference is credited back to Capo.

• Trade is concluded.

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Put Options

Scenario:

Trade Creation

• Writer, Capo, owns 1000 GPU tokens.

• He is concerned about the potential decrease in price over the next 30 days.

• Capo Deposits 1000 GPU to the Xeon Protocol Vault.

• Capo Writes a Put Option using 1000 GPU tokens as the underlying asset.

• Cost/premium 0.1 WETH. Duration 30 days. Strike price 0.5x from now, or strike value 0.5 WETH.

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Trade Taking

• Taker, DegenX, wants to hedge against a potential decrease in GPU token price and sees Capo's OTC trade on the Silkroad.

• DegenX is concerned GPU might dip in the next 30 days.

• Current market value of 1000 GPU tokens is 1 WETH.

• Strike value of 1000 GPU tokens is 0.5 WETH.

• DegenX Deposits 0.1 WETH to the Xeon Protocol Vault.

• DegenX Buys Capo's GPU Put Option, his 0.1 WETH is credited to Capo instantly as the Cost. Capo can immediately withdraw it as extra liquidity to buy more tokens.

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Trade Running

• GPU price drops to 0.25x.

• Current market value of 1000 GPU tokens is now 0.25 WETH.

• Strike price or value is now double the market value.

• Expiry or trade duration is up.

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Trade Settlement

• DegenX owes Capo

$$1 ETH - 0.25 ETH = 0.85 ETH$$

Owed = Strike Value - Start Value.

Start Value = Token Price * Token Amount

Strike Value = Strike Price * Token Amount Equivalent in GPU

• Settlement function debits the owed Profit equivalent in GPU tokens from DegenX and credits it to Capo.

• The difference is credited back to DegenX. Trade is concluded.

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Equity Swaps

Scenario:

Trade Creation

• Writer, Capo, owns 1000 GPU tokens.

• He is concerned about the potential decrease in price over the next 30 days.

• Capo Deposits 1000 GPU to the Xeon Protocol Vault.

• Capo Writes a Equity Swap using 1000 GPU tokens as the underlying asset.

• No cost is paid. Duration 30 days.

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Trade Taking

• Taker, DegenX, wants exposure to GPU tokens but doesn't want to by them outright because of swap tax & ethereum gas fees. He sees Capo's OTC trade on the Silkroad.

• DegenX is very confident the price will go up in the next 30 days.

• Current market value of 1000 GPU tokens is 1 WETH.

• DegenX Deposits 1 WETH to the Xeon Protocol Vault to match the value and take the Swap.

• DegenX takes Capo's GPU EquitySwap for 1000 GPU tokens, his 1 WETH is locked in as collateral the same as Capo's GPU tokens.

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Trade Running

• GPU price soars 10x.

• Current market value of 1000 GPU tokens is now 10 WETH.

• Expiry or trade duration is up.

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Trade Settlement

• Capo owes DegenX

$$CurrentUnderlyingValue - StartingValue$$

• The difference is taker payoff, calculated in GPU tokens and credited to DegenX's balance.

• DegenX 1 WETH collateral in the Swap is also unlocked and credited back to withdrawable balance.

• Capo receives the balance of the GPU tokens left after settlement to DegenX.

Note: If the price was to go down 10X, then DegenX would owe Capo