2023-11-15 12:29:17Discount Buy is a structured financial product that helps users stack up their crypto holdings during periods of low market volatility. The concept of Discount Buy is similar to a knockout option, which sets a cap on the price level in the holder’s favor.
However, unlike knockout options, a Discount Buy plan will not expire worthless. Users have the option to buy the desired coin at a price lower than the market price at the time of order placement.
How Does Discount Buy Work?
Users will need to enter an investment amount to purchase a Discount Buy plan. At expiration, there will be two scenarios as illustrated below:
|
Scenarios |
Conditions |
Outcome at Settlement |
|
Knockout Scenario |
Settlement Price ≥ Knockout Price |
Payoff = Principal + Additional APR (in USDT) |
Buy Scenarios |
Purchase Price <Settlement Price < Knockout Price |
Buy desired coins at the Purchase Price (Profitable) |
|
Settlement Price < Purchase Price |
Buy desired coins at the Purchase Price (Not profitable) |
Let us illustrate this further with an example.
Example
If Trader A wants to invest 10,000 USDT into BTC using Discount Buy, and the current market price of BTC is 30,500 USDT,
Purchase Price: 29,900 USDT
Knockout Price: 31,000 USDT
Let’s consider two (2) scenarios on the settlement time.
Scenario 1: Buy Scenarios
If the Settlement Price is 30,800 USDT, sitting below the Knockout Price at 31,000 USDT, Trader A will receive 0.33 BTC (worth 10,000 USDT) at the price of 29,900 USDT, thus making a profit.
If the Settlement Price is 29,000 USDT, sitting below the Purchase Price at 29,900 USDT, Trader A will receive 0.33 BTC (worth 10,000 USDT) at the price of 29,900 USDT, thus incurring a loss.
Scenario 2: Knockout Scenario
If the Settlement Price is 32,000 USDT, sitting above the Knockout Price at 31,000 USDT, Trader A will receive the initial investment and coupon payment (8% APR) in USDT. The total payoff is calculated with the formula below:
Payoff = Principal + 8% APR = 10,000 + 10,000 * 8% * 1/365 = 10,002.19 USDT
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How to Get Started with Discount Buy
Risks
Although the Purchase Price could be below the market price at the time of order placement, it might still be higher than the Settlement Price. In such scenarios, the settlement would continue to be based on the Purchase Price, resulting in a loss for the trader.
Notes
- Currently, the minimum investment amount for Discount Buy is 10 USDT and the maximum amount is capped at 1,000,000 USDT.
- Once successfully subscribed, the Discount Plan order cannot be modified or canceled.
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