Augur is an open-source, decentralised, peer-to-peer prediction market platform that is built using the Ethereum protocol and rewards users for correctly predicting future real-world events. Augur’s competitiveness to other prediction markets stems from being a decentralised network. Augur issued a token known as Reputation that can be used on the platform to create and trade the prediction markets. The trading fees generated from the market platform are distributed amongst Reputation token holders. Reputation tokens are denominated by the currency code REP. Further information about Augur and the token REP can be found here.
On BitMEX, the REP derivative is in the form of a Futures Contract and allows traders to speculate on the future value of the Reputation / Bitcoin (REP/XBT) exchange rate. Traders need not have Reputation to trade the futures contract as it only requires Bitcoin as margin.
The REP futures’ underlying is the REP/XBT exchange rate on Poloniex as recorded in the .REPXBT Index. The futures are quoted in Bitcoin and all margin and PNL calculations are denominated in Bitcoin.
|XBT Contract Value||Multiplier * Futures Price * 1 REP|
|USD Contract Value||XBT Contract Value * XBTUSD|
|PnL Calculation||# Contracts * Multipler * (Exit Price - Entry Price)|
Traders who think that the price of REP 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 REP futures contracts feature a leverage of up to 10x.
For example, to buy 10 Bitcoin worth of contracts, you will only require 1 Bitcoin of Initial Margin.
The REP futures contracts settle on the .REPXBT30M Index Price. Settlement occurs every Friday at 12:00 UTC.
A trader wants to goes long 10 XBT of REP futures contracts. REP7D (the weekly REP futures contract) trades at 0.0200 XBT. As the leverage is 10x, the trader only needs 1 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