Theta Futures Explained - What are THETA Futures and How They Work
A Theta futures contract is an agreement to buy or sell a specific quantity of Theta (THETA) at a predetermined price at a specified time in the future.
Theta futures markets provides two very important features to cryptocurrency traders:
- Buying THETA futures allow traders to control more Theta tokens through the use of leverage (10x to 50x not uncommon)
- Selling THETA futures allow traders to profit from a fall in THETA price
Buying THETA Futures (or Long THETA Futures)
You buy THETA futures if you wish to profit from a rise in the price of Theta in the near future. This trading strategy is also known as opening a long THETA futures position
At 10x leverage, buying a $100 THETA futures contract will let you ‘own’ $1,000 worth of Theta.
However, do note that should the price of THETA fall more than 10%, you will stand to lose your entire $1,000 investment as your position gets liquidated.
A Simplified Example
Let’s suppose THETA is trading at 1 USDT per token. A THETA futures trader is bullish and decides to open a long THETA futures position at that price by buying 10,000 THETA futures contract at 10x leverage.
With each contract having a contract size of 1 THETA, the initial margin required to open this position is: 10,000 x $1 / 10 = $1,000
Depending on how the price of THETA performs, the trader can either make a lot of money or lose his entire investment.
Bullish Scenario: Price of THETA Rallies to $1.1
If the price of THETA goes up to $1.1, the trader’s position will be in the money and has a profit of $1,000. He can then close the futures position to take profit with a ROI of 100%, even though the THETA price only moved 10%. This remarkable performance is possible due to the 10x leverage used.
Bearish Scenario: Price of THETA crashes to $0.9 or lower
In the event that the Theta price goes down to $0.9 or lower, the trader’s position will be liquidated and he loses his entire investment of $1,000.
Note that even if the price of THETA dived down to $0.8 or even lower, the maximum loss sustained by the trader is still capped at $1,000.
Note: The above examples are simplified to aid understanding of the basic concepts behind THETA futures trading. Actual profits and losses may differ materially due to a variety of trading fees involved. We will cover those fees and more in our upcoming Theta Futures trading guide.
Theta Futures & Derivatives Guides
Theta Futures Explained - What are THETA Futures and How They Work
A Theta futures contract is an agreement to buy or sell a specific quantity of Theta (THETA) at a predetermined price at a specified time in the future.
Theta futures markets provides two very important features to cryptocurrency traders:
- Buying THETA futures allow traders to control more Theta tokens through the use of leverage (10x to 50x not uncommon)
- Selling THETA futures allow traders to profit from a fall in THETA price
Buying THETA Futures (or Long THETA Futures)
You buy THETA futures if you wish to profit from a rise in the price of Theta in the near future. This trading strategy is also known as opening a long THETA futures position
At 10x leverage, buying a $100 THETA futures contract will let you ‘own’ $1,000 worth of Theta.
However, do note that should the price of THETA fall more than 10%, you will stand to lose your entire $1,000 investment as your position gets liquidated.
A Simplified Example
Let’s suppose THETA is trading at 1 USDT per token. A THETA futures trader is bullish and decides to open a long THETA futures position at that price by buying 10,000 THETA futures contract at 10x leverage.
With each contract having a contract size of 1 THETA, the initial margin required to open this position is: 10,000 x $1 / 10 = $1,000
Depending on how the price of THETA performs, the trader can either make a lot of money or lose his entire investment.
Bullish Scenario: Price of THETA Rallies to $1.1
If the price of THETA goes up to $1.1, the trader’s position will be in the money and has a profit of $1,000. He can then close the futures position to take profit with a ROI of 100%, even though the THETA price only moved 10%. This remarkable performance is possible due to the 10x leverage used.
Bearish Scenario: Price of THETA crashes to $0.9 or lower
In the event that the Theta price goes down to $0.9 or lower, the trader’s position will be liquidated and he loses his entire investment of $1,000.
Note that even if the price of THETA dived down to $0.8 or even lower, the maximum loss sustained by the trader is still capped at $1,000.
Note: The above examples are simplified to aid understanding of the basic concepts behind THETA futures trading. Actual profits and losses may differ materially due to a variety of trading fees involved. We will cover those fees and more in our upcoming Theta Futures trading guide.