WIX contracts are simple way for you to take a position on whether or not the index price of an asset will TOUCH a specified price (the “strike price”) at any time prior to the contract expiration date.
Taking a “YES” position on a WIX strike means you believe the index price will be touched at any time prior to expiration. Buying a “NO” position on a strike means you believe the index price will not be touched at any time prior to expiration.
Similiar to the TIX contract, WIX markets expire to either a price of $1.00 or expire worth $0.00 (remember this is the price of the WIX contract, not the price of the underlying index). At any time prior to the contract expiration date, the price of the contract will fluctuate somewhere between $0.00 and $1.00. This price represents the current markets indicative probability of the underlying index touching the strike prior to expiration.
On the Hxro UI you will see this indicative value as market “odds”. This means that if the current probability was trading at $0.25 (or 25% probability), you would receive 4.00x (1/0.25) to buy the YES and 1.334x (1/0.75)to buy the “NO”.
It’s important to note that you may only go long YES or long NO, you cannot short.
How does a WIX contract work?
Assume Dan is super bullish on the price of bitcoin. On December 1st he looks at the market and sees that the current BTC index price is $16,500, Dan believes that at some point between now and December 25th, that Bitcoin will touch $20,000. Dan looks at the BTC-WIX TOUCH $20,000 by DEC 25, 2020 and sees that it’s trading at 4x (or a 25% probability). Dan thinks this is a fair price for his risk and trades 100 USDC for 400 WIX contracts.
Once Dan has the position on he has a few options. Dan can:
- HODL until December 25th, or until touches $20,000 (which is must do prior to December 25th in order to pay out its full value), or;
- Add to the position if his conviction becomes stronger about his position, or;
- Sell a portion or the entirety of the position at any time prior to expiration.
"There are times when TixWix contracts with low probability of payout do not have a bid in the market to close a position when a quote is requested. The width of the bid/ask market on quotes for these low probability contracts is typically very wide as a percentage of the price paid for the contract. The underlying index will need to move substantially in your favor in order for the contract to gain enough value to close out the contract before expiration. This makes the low probability contracts very difficult to “flip” or sell out quickly for a profit. Therefore, when purchasing contracts with low probability of payout, the odds are very high that you will lose 100% of the entry value."