The Ethereum (ETH) derivative is in the form of a Futures Contract and allows traders to speculate on the future value of the Ether / Bitcoin (ETH/XBT) exchange rate. Traders need not have Ether to trade the futures contract as it only requires Bitcoin as margin.
The ETH futures’ underlying is the ETH/XBT exchange rate on Poloniex as recorded in the .ETHXBT Index. The futures are quoted in Bitcoin and all margin and PNL calculations are denominated in Bitcoin.
|XBT Contract Value||Multiplier * Futures Price * 1 ETH|
|USD Contract Value||XBT Contract Value * XBTUSD|
|PnL Calculation||# Contracts * Multipler * (Exit Price - Entry Price)|
Traders who think that the price of ETH will rise will buy the futures contract. Conversely, traders who believe the price will drop will sell the futures contract.
All margin is posted in Bitcoin, that means traders can go long or short this contract using only Bitcoin. The ETH futures contracts feature a leverage of up to 33x.
For example, to buy 33 Bitcoin worth of contracts, you will only require 1 Bitcoin of Initial Margin.
The ETH futures contracts settle on the .ETHXBT30M Index Price. Settlement occurs every Friday at 12:00 UTC.
A trader wants to goes long 10 XBT of ETH futures contracts. ETH7D (the weekly ETH futures contract) trades at 0.0200 XBT. As the leverage is 33x, the trader only needs 0.3 XBT of margin for this trade.
The trader must buy 500 contracts: 10 XBT / (0.0200 XBT * 1).
A few days later, the price rises to 0.0250 XBT and the trader sells all their contracts.
The trader’s profit will be: 500 * 1 * (0.0250 - 0.0200) = 2.5 XBT