Expiry Payoff of Square Option Tokens
Each token has an expiry date. The system will take the average of the underlying index in the last 30 minutes before 08:00 (UTC) on the expiry date as the Settlement Price. The system will calculate your returns on the expiry date at 08:00 (UTC) based on the Settlement Price and the Strike Price. You will receive your returns in USDT within 2 hours.
Square Option Payoff at Expiration (per unit of underlying asset):
Where
CT:Expiry USDT profit for 1 unit of underlying asset from a square call option
ST: Settlement Price of Underlying. i.e., the average of the underlying index in the last 30 minutes before 08:00 (UTC) on the expiry date
K: Square Option strike price
PT:Expiry USDT profit for 1 unit of underlying asset from a square put option
*Please note the multiplier for each square option token, for example, one BTC²UP token represents a square call option on 0.01 BTC.
Compared to the expiry profit of a standard vanilla option:
From the formula, it can be seen that square options can yield much higher profits than vanilla options in sharp market rises, and vice versa.
Example of square option token payoff at expiration
Example 1
User purchased a BTC²UP call squared option expiring in February on January 5, 2024, with the following parameters:
Expiration date: Last Friday of February, which is February 23
Strike: 49,000 USDT
Underlying price at the time of trading: 40,353 USDT
Multiplier: 0.01
Assuming the token price at purchase was 35.50 USDT, the user bought 100 tokens, totaling 3,550 USDT. After deducting the transaction fee (assuming a 0.05% fee), the user received 99.95 tokens.
On the expiry date, with the BTC settlement price at 51,007.92:
According to the expiry profit formula, the amount of USDT the user can redeem is calculated as:
(51,007.92² / 49,000 - 49,000 ) * 0.01 * 99.95 = 4,096.07 USDT
The redemption fee is calculated as: Redemption token quantity * Settlement price * Redemption fee rate * Token multiplier. Assuming a redemption fee rate of 0.15%, the redemption fee is:
99.95*51,007.92*0.15%*0.01 = 76.47 USDT
So, the net USDT amount redeemed by the user is:
4,096.07 - 76.47 = 4,019.6 USDT
Example 2:
User purchased a BTC²DOWN square put option expiring in February on January 5, 2024, with the following parameters:
Expiration date: February 23
Strike: 32,000 USDT
Underlying price at the time of trading: 40,353 USDT
Multiplier: 0.01
Assuming the token price at purchase was 22.10 USDT, the user bought 100 tokens, totalling 2,210 USDT. After deducting the transaction fee (assuming a 0.05% fee), the user received 99.95 tokens.
On the expiry date, with the BTC settlement price at 51,007.92, according to the expiry profit formula, the user can redeem zero USDT, as the token value has dropped to zero.