Glossary

Contract

“Contract” here refers to the general term of various standardized trading products formulated by the BFX Digital Assets Contract Trading Platform. The terms of the contract stipulate the setting elements of each product and require the buyer (also called the long side) and the seller (also called the short side) jointly observe and trade by paying a certain percentage of USD as margin. Such as the BTC contract, EOS contract and other trading products provided by this platform.

Underlying Asset

"Underlying Asset" here refers to general term of basis cash commodities of various standardized trading products developed by the BFX Digital Assets Contract Trading Platform. For example, the underlying asset of BTC Contract is "Bitcoin Price Index".

Margin Trading

Margin trading refers to the fact that when a customer buys or sells a contract, he/she only needs to pay USD as a margin according to a certain percentage of the contract opening amount without full payment. But the profit and loss is determined according to the actual opening amount, making the trading gains and losses of contract have a leverage effect.

Open a position/Open positions

Open positions are also called establish positions or “establish trading positions”, which means that investors buy or sell a certain number of contracts that are divided into “open positions for buying” and “open positions for selling”. The contract transaction is the same as the cash trading. If one wants to buy, there must be another one who want to sell.

If A wants to buy 10 BTC contracts, and B wants to sell 10 BTC contracts at this time, then they can trade. Both of them open a position at the same time and are called “open a position for buying” and “open a position for selling” respectively.

Close a position/ Close positions

“Close a position” or “hedge” refers to the behavior of a trader to trade his/her contract reversely. Measures of stop loss by closing a position to prevent excessive loss is also called "Close Out the Open Positions at a Loss to Stop the Loss".

Forced liquidation triggered price

Forced liquidation triggered price,Forced liquidation triggered price is a price that will be forced to hang out by the burned position price when your margin is insufficient (please note that in order to avoid manipulation, the forced liquidation triggered price is the index price, not the platform market price). In the case of 20 times leverage, in order to make the forced liquidation positions traded in a timely manner, the forced liquidation triggered price will be ahead of burned position price (advanced 1%). If there is any remaining margin after the actual transaction after hanging out, it will be owned by the user.

Strike Price

Strike price means that the trading platform's computer automatic blending system ranks orders of sale and purchase according to the principle of price priority, time priority, and liquidation priority. When the buying price is higher than or equal to the selling price, it is automatically traded.

Go Long/ Go Short

Users believe that prices will go up, then his/her buying contracts are called “go long”, which means long trades. The held positions are called long positions, and short for go long;

Bearish on the price and sell the contracts called “short-selling" or “go short”, which means short trades. The held positions are called short positions, and short for go short.

Example: If A buys 10 BTC contracts when B sells 10 BTC contracts at the same time and the strike price is 8,000 US dollars, that’s to say A has 10 long positions and B has 10 short positions. If the price rises to 8500 USD, A sells and closes 5 BTC contracts, and B buys 5 BTC contracts at the same time. After that, A's are 5 long positions, and B’s actual BTC contracts are 5 short positions.

Position/ Open interest

Position refers to the state in which the contract trader holds an open contract.

Open interest refers to the number of open contracts held by the contract trader.

Normal Market/ Inverted Market

Normal market: Under normal circumstances, the underlying index price is lower than the virtual contract price or the recent contract price is lower than the forward contract price, which is called the normal market.

Inverted market: Under special circumstances, the underlying index price is higher than the virtual contract price or the recent contract price is higher than the forward contract price, which is called the inverted market.

Bull market/ Bear market

Bull market: the market during price increasing.

Bear market: the market during price dropping.

Matching

Matching refers to the process of matching orders between trading parties by the trading platform's computer system.

Minimum Price Fluctuation

The Minimum Price Fluctuation refers to the minimum value of the fluctuation in the unit price of a particular contract.

Hedging Transaction

The hedging transaction refers to a trading activity in which the spot supply and demand party of a target product hedges the spot price fluctuation through the virtual contract trading market.

Take the bitcoin contract as an example to illustrate as follows:

The hedging of Bitcoin related parties of cash-supply-and-demand refers to trading activity of Bitcoin producers (miners), traders who need Bitcoin settlement, and long-term holders, take Bitcoin virtual contract trading market as a place to transfer price risk using virtual bitcoin contracts for insurance to circumvent the risks of Bitcoin exchange rate fluctuations. The purpose of hedging can be divided into long hedges and short hedges. The participants in hedging can be divided into producers, operators (traders), and holders.

  1. The seller's selling period hedge:the miners who produce Bitcoin should do a sell hedging transaction on Bitcoin virtual contract trading market to prevent prices from falling and affecting the mining revenue when in the high price. After that, even if the Bitcoin price plummets, it will not have too much impact on profits;
  2. The operator's hedging: operators who will buy Bitcoin in the future can do a sell hedging transaction if they are afraid that they will get lower price Bitcoin as they believe the current price is higher; operators who will pay Bitcoin in the future can do a buy hedging transaction if they are afraid that they will pay more as they believe the current price is lower, but they do not want to buy Bitcoin with a lot of money now.;
  3. The holder's hedging: If someone temporarily holds a large amount of Bitcoin for some reason, he/she fears that the price will fall or the assets will shrink for the reason of Bitcoin industry in the future, he/she can throw it up and do a sell hedging.

Spread trading

Hedging is a low-risk investment behavior. The participation of spread traders is conducive to the improvement of market pricing mechanism. The formation of a market price mechanism is essential. Spread tradings are divided into calendar spread, intercommodity spread, cross-time spread, and cross-market spread. A brief explanation is as follows:

  1. Intercommodity spread refers to the use of price differences between two different but interrelated contracts for arbitrage.

    Buys (sells) a contract for a certain delivery month and sells (buys) another contract with related products in the same delivery month. For example, there is a price difference between Bitcoin and Litecoin, and investors can use the ratio change relationship between the two coins to make intercommodity spread.

  2. Cross-time spread refers to arbitrage with the price difference of Bitcoin contract and cash commodity

    Cross-time spread refers to arbitrage with the price difference of the underlying contract price and spot price

    In theory, the contract price is the future price of a target product, and the spot price is the current price of a target product. According to the same price theory in economics, the gap between the two is the “basis difference” (basis difference = spot price - contract price), which should be equal to the holding cost of the product. In Bitcoin trading, bitcoin's holding cost are mainly reflected in transaction fees.

  3. Cross-market spread is to arbitrate with different contract prices in different exchanges of a underlying specific product.

    The arbitrage cost mainly refers to transaction fees. It should be noted, however, that if the delivery underlying assets of the two contract markets are not completely homogenous, there may be a difference.

Statement:The platform reserves the right to modify the relevant trading rules based on changes in the market or industry. If there are any changes, we will notify you through various channels in advance. However, we do not guarantee that we will be able to notify every user. Therefore, please continue to pay attention to this page or Website announcements to get the latest rules information. In addition, the relevant examples mentioned in this explanation are only for the purpose of making the rules be easy to understand, and the platform cannot guarantee it absolute accurate. As a result, the platform is not liable for any loss.