A sell example
This is an educational example. Prices are chosen to explain the rules, and all fees and execution costs are excluded. The Contract price is an example, not a suggested or fair market price.
| Term | Value |
|---|---|
| Yesterday’s reference K | 80,000 USDC per BTC |
| Execution price S | 76,000 USDC per BTC |
| Reference size n | 1 BTC |
| Gap | 5% |
| Split rate q | 2.5 |
| Conversion output R | 76,000 USDC |
| Buyer payment P | 1,000 USDC |
| Funded amount C | 77,000 USDC |
The sell direction is eligible because S is below K. The buyer’s 1,000 USDC is added to the seller’s converted funds and locked.
Possible outcomes
Section titled “Possible outcomes”| Tomorrow's average (USDC/BTC) | Buyer payout | Seller payout | Buyer net | Seller net at entry |
|---|---|---|---|---|
| 76,000 | 0 | 77,000 | -1,000 | 1,000 |
| 80,000 | 0 | 77,000 | -1,000 | 1,000 |
| 80,400 | 1,000 | 76,000 | 0 | 0 |
| 80,800 | 2,000 | 75,000 | 1,000 | -1,000 |
| 120,000 | 77,000 | 0 | 76,000 | -76,000 |
The two payouts always add up to 77,000 USDC. The net results compare against 1,000 USDC paid by the buyer and 76,000 USDC from the seller’s entry conversion.
Follow the 80,800 result
Section titled “Follow the 80,800 result”Tomorrow’s average is 800 USDC above the reference. The buyer allocation is:
2.5 × 1 BTC × 800 USDC/BTC = 2,000 USDCThat is below the 77,000 cap, so the buyer receives 2,000 USDC. The seller receives 75,000 USDC.
The buyer’s net result is +1,000 USDC. The seller’s net result against conversion at entry is -1,000 USDC.
Receiving money is not the same as making money
Section titled “Receiving money is not the same as making money”At H = 80,400, the buyer receives exactly the 1,000 USDC they paid. Their result is zero before costs. A smaller positive payout would still leave a loss.
At H = 120,000, the raw formula is larger than the funded amount. The buyer receives the full 77,000 cap, and the seller receives zero. Neither side owes an extra deposit.
A target would change the funding
Section titled “A target would change the funding”At the same entry price, a target of 79,000 USDC would require a 3,000 USDC buyer payment. q would still be 2.5. The buyer’s cost and the cap would be different, so their net result would also be different.