The OD.exchange trading experience
Price development of financial assets
Financial assets like stocks, commodities and foreign currencies are subject to price fluctuations.
Imagine the following: You are tracking the price development of a stock. You think that on a certain date (we call this ‘due date’) the price will be well above a certain value (we call this ‘strike price’).
Another person – your counterparty – thinks the opposite
The smart contract
Thanks to the Ethereum blockchain you can set up a smart contract easily. Both of you can send, for example, 1 ETH to this smart contract. These 2 ETH will remain locked in the smart contract until the due date.
Strike price and due date
You and your counterparty will now wait until the due date.
Loosing the bet
First, let’s consider the case in which the price did not develop in your favor. In this example it would be 10 % less than the strike price on the due date.
Contract settlement – loosing
In this case you lose 10 % of your deposited 1 ETH. You can now only withdraw 0.9 ETH from the smart contract. Your counterparty, however, can withdraw 1.1 ETH.*
Winning the bet
Now, let’s consider the case in which the price developed in your favour. In this example it would be 20 % above the strike price.
Contract settlement – winning
In this case you will be happy to win 20 % of the 1 ETH you deposited in the smart contract. You can now withdraw 1.2 ETH while your counterparty can only withdraw 0.8 ETH.*
Leverage your stake
In order to make things a little more exciting, OD.exchange has added a leverage factor of 2 on the price development. This increases the potential gains and also the potential losses by a factor of 2.
* OD.exchange charges a brokerage commission of 0.25 % of the contract’s value at maximum – contract creators do not pay any fee to OD.exchange. See section VII. of How It Works for more details.