Litecoin is an alternative digital currency to Bitcoin but capable of handling higher transaction volume and is denominated by the currency code LTC. Due to more frequent block generation, the network supports more transactions without a need to modify the software in the future. As a result, merchants get faster confirmation times, while still having ability to wait for more confirmations when selling bigger ticket items. Further information about the Litecoin Project and LTC can be found here.
On BitMEX, the LTC derivative is in the form of a Futures Contract and allows traders to speculate on the future value of the Litecoin / Bitcoin (LTC/XBT) exchange rate. Traders need not have Litecoin to trade the futures contract as it only requires Bitcoin as margin.
The LTC futures’ underlying is the LTC/XBT exchange rate on Poloniex, Kraken and Binance as recorded in the .BLTCXBT Index. The futures are quoted in Bitcoin and all margin and PNL calculations are denominated in Bitcoin.
|XBT Contract Value||Multiplier * Futures Price * 1 LTC|
|USD Contract Value||XBT Contract Value * XBTUSD|
|PnL Calculation||# Contracts * Multiplier * (Exit Price - Entry Price)|
Traders who think that the price of LTC 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 LTC futures contracts feature a leverage of up to 33x.
For example, to buy 10 Bitcoin worth of contracts, you will only require 0.3 Bitcoin of Initial Margin.
The LTC futures contracts settle on the .BLTCXBT30M Index Price. Settlement will occur on the last Friday of the Settlement Month.
A trader wants to goes long 10 XBT of LTC futures contracts. LTCM17 (the LTC futures contract expiring in June 2017) 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