- None of this is investment advice.
- Much of the below analysis ignores any difference between futures and spot prices, and ignores the effects of fees.
- MOVE products, like the rest of FTX, are not being offered to US users.
What are MOVE contracts?
MOVE contracts represent the absolute value of the amount a product moves in a period of time. So if a daily BTC moves $125 from the beginning to end of a day, the BTC-MOVE contract will expire to $125 whether BTC went up or down.
Getting long MOVE contracts means you will win if BTC moves a lot the next day in either direction. Getting short MOVE contracts means you will win if BTC is relatively stable.
MOVE contracts are basically like futures; except instead of expiring to the price of a token, they expire to the amount its price moved. Like futures, you can get leveraged long or short MOVE contracts using collateral.
What type of MOVE contracts are there?
There are two types of MOVE contracts.
Daily MOVE contracts expire to the move of BTC over a single day's period. Their ticker is [underlying]-MOVE-[expiration date]; e.g. BTC-MOVE-1116 is the BTC MOVE contract expiring at the end of November 16th UTC.
Weekly MOVE contracts expire to the move of BTC over a 7 day period. Their ticker is [underlying]-MOVE-WK-[expiration date]; e.g. BTC-MOVE-WK-1122 expires to the amount that BTC moves between the start of November 16th and the end of November 22nd.
How do MOVE contracts work?
Take, for example, a BTC-MOVE 2018-08-30 contract. This contract trades during the previous day (2018-08-29) as a futures market. At the end of 2018-08-30 it expires to the absolute value of the BTC move from the start of 2018-08-30 until the end of 2018-08-30. So if BTC goes from 9400 to 9650 during 2018-08-30 MOVE expires to $250; if BTC goes from 9400 to 9300 MOVE expires to $100. This means that MOVE expires to a positive number whether BTC goes up or down; its price is determined by how much BTC moves, not which direction it moves in.
What does MOVE expire to?
In particular, MOVE products expire to the absolute value of the difference between the TWAP price of underlying over the first hour and the TWAP price of the underlying over the last hour of their expiration time, measured in UTC.
There will be a new MOVE contract every day to trade the next day's move, in addition to one to trade the current day's move. There will also be a MOVE contract to trade the current week and the three weeks after it. Every MOVE contract's underlying product is the FTX BTC spot index, and all other references to BTC in this article really mean the BTC index.
How does MOVE relate to options and volatility?
MOVE contracts are straddles with a strike price equal to the TWAP of the first hour of their expiration period and underlying expiration price equal to the TWAP of the last hour of their expiration period.
The more volatile a product is, the higher its expected move. If you assume that products follow a Gaussian distribution then the expected value of the absolute value of a product's move should be sqrt(2/pi) times the product's daily volatility (or weekly volatility for weekly MOVE contracts). This means that daily MOVE contracts should be worth roughly 80% of the product's daily volatility.
How does FTX show MOVE PnL?
Until a MOVE contract expires, its PnL will be marked to market--meaning that your PnL will be (number of MOVE contracts bought) * (mark price - purchase price).
Once a MOVE contract expires--which will happen at the end of its expiration day UTC--it will be replaced in your account with an amount of USD equal to its expiration price.
How does margin work for MOVE?
Each MOVE contract requires margin based on the price of the underlying index. This means that a BTC-MOVE contract--representing the one-day move of one BTC--requires roughly the same amount of margin as a BTC-PERP contract.
For instance, if you select 20x leverage and want to buy one BTC-MOVE contract when BTC-MOVE is trading at $150 and BTC is trading at $10,000, you will post $500 of collateral. This means that the margin treatment of a MOVE contract depends only on its underlying index's price and not at all on the price of the MOVE contract itself.
So, to be explicit, each BTC-MOVE contract requires as much collateral as a BTC contract.
The high leverage limits, initial margin factor, etc. for BTC-MOVE are the same as those for BTC-PERP; they're all marked to the BTC index price.
This is because the amount that a MOVE contract's price will change is the same as the amount the underlying index will change, and so the risk profile is the similar.
As an example: let's say that BTC starts a day at 10,000 and doesn't move for 20 hours. At this point the BTC-MOVE contract expiring at the end of that day is probably trading at close to 0 (maybe $50 or so). If BTC then increases 3% in the last 4 hours, BTC-MOVE will expire to $300. So the MOVE contract's price changed by about $250 in the last few hours--similar to the $300 that BTC's price changed. The risk of holding a single BTC-MOVE contract is similar to the risk of holding a single BTC, so they require the same amount of collateral.
The price of the underlying index is listed on the market page for the MOVE contract.
However, if you are LONG a MOVE contract, the amount of margin you have to post is capped at the mark price of the MOVE contract. This means that your margin posted is whichever is smaller--the margin you'd need to post based on the index price, or the mark price of the MOVE contract if you're long.
Say that you have $1,000 in your account, MOVE is trading at $250, you select 20x maximum leverage, and BTC is trading at $10,000,.
In order to go short MOVE:
Your maximum leverage is 20x, so your initial margin has to be 5%. 5% of $10,000 is $500, so you have to post $500 of collateral per MOVE; that means that you can get short at most $1,000 / $500 = 2 MOVE contracts.
In order to get long MOVE:
As above, the BTC price would imply you would have to post $500 of collateral per MOVE. However note that if you're getting long you never need more collateral than the price of the MOVE contract--in this case $250. So in fact you can get long up to $1,000 / $250 = 4 MOVE contracts.
In general, if you're getting short MOVE, your maximum position size is:
Free collateral * Max allowed leverage / BTC price
If you're getting long MOVE your maximum position size is:
Free collateral * MAX( Max allowed leverage / BTC price, 1 / MOVE price)
Liquidations for MOVE work the same as liquidations for other contracts, given the margin requirements. If your total collateral drops below your required maintenance margin, you will begin to get liquidated.
Note that if you buy less notional of MOVE than you have USD collateral in your wallet, don't have any other positions on, don't deposit/withdraw, and all your collateral is USD, then you cannot get liquidated since MOVE cannot go below zero. However if any of these aren't true--if you have other positions, spend more buying MOVE than you have USD, sell MOVE, are using non-USD collateral, or withdraw collateral, it is possible to get liquidated. In particular, if you're buying MOVE, then whether or not you can get liquidated if MOVE goes to 0 depends on whether your available USD collateral is more or less than the price of MOVE times the number of MOVE contracts your're buying.
Expired MOVE contract
The fees charged on MOVE contracts are the same in magnitude as the fees charged on the underlying spot market. So if your fee rate is 0.04% and you buy one BTC-MOVE when BTC-MOVE is trading at $250 and BTC is trading at $10,000, then your fees will be 0.04% * $10,000 = $4. This is because the volatility, risk, and PnL profile of BTC-MOVE is similar to that of BTC: both move roughly $1 when BTC moves $1, and so both have similar margin requirements and fees in notional terms.