On Friday, LedgerX introduced its first Long-Term Equity Anticipation Securities (LEAPS). The contract is set to expire on the 28th December, 2018.
As per the terms set by the firm, the investors can buy the securities at $10,000 on that date, an almost 30 percent premium on today’s price.
But unlike future swaps, buyers are not obligated to purchase the asset. They only have to pay a price of $2,250.25 for the trade. So if by the end of the expiration date the price of Bitcoin is less than $10,000, the seller will only collect $2,250.25 from the buyer. But if it crosses the strike price of $10,000, the buyer gets to purchase the Bitcoin at the set strike price.
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According to LeggerX’s analysis, there is a 25% chance of Bitcoin crossing $10,000 by the end of next year.
LEAPS are very popular in the options market. These publicly traded options contracts have an expiration date of over a year. The premium of LEAPS is usually placed higher as the more extended expiration period gives the asset time to make a substantial move and provide a good return.
Paul Chou, CEO of LedgerX, in an interview with Coindesk, said: “There will be, I expect, a lot more trades down the line. This is the first one, but it at least gives you the first guess from different institutional traders as to what bitcoin’s dynamics will look like from now until 2018.”
Just a day later after the launch, two institutional investors agreed to the terms of LedgerX’s options contract.