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Derivatives Trading on FTX Suggests Users Think Trump Will Win the 2020 Election


Derivatives Trading on FTX Suggests Users Think Trump Will Win the 2020 Election

Crypto traders can now trade a TRUMP crypto derivative product on the FTX exchange, betting on the outcome of the 2020 elections

Crypto derivatives exchange FTX recently launched “TRUMP,” a new futures trading product that lets users bet on President Trump’s re-election in 2020.

TRUMP “is a futures contract that expires to $1 if Trump wins the 2020 presidential general election and $0 otherwise,” an FTX representative told Cointelegraph. “So far most of the volume has traded on the offer, implying that traders think Trump is likely to win re-election.”

Derivatives products seem complex at first

Crypto derivatives trading has expanded significantly over the past several years, with exchanges such as BitMEX and OKEx posting significant trading volume for their Bitcoin futures trading products. Mainstream finance even jumped on the bandwagon with the Chicago Mercantile Exchange’s Bitcoin futures trading launch in 2017, and its later options trading launch in 2020.

These derivative products aren’t cryptocurrencies, however. Participants cannot send futures, options or other derivatives to other exchanges. These products trade contracts that are native to the exchanges hosting them. The same goes for FTX’s TRUMP product.

TRUMP futures trading is quite simple

Essentially, FTX’s TRUMP allows participants to bet on the likelihood of victory for President Trump in the November 2020 U.S. elections, FTX explained in a blog post on Feb. 6.

The price of each TRUMP contract only ranges between $0 and $1. The asset becomes worthless if Trump loses the election, but if he wins, the TRUMP asset automatically becomes worth $1.

TRUMP is trading around $0.62 at press time. That means a user could buy 100 TRUMP contracts for roughly $62. If that user holds their position until election time and Trump wins, then the TRUMP asset automatically shoots to $1, turning that user’s $62 into $100.

FTX’s blog post elaborated:

“Theoretically — ignoring interest rates, fees, inefficiency, spread, etc. — the price of one contract of TRUMP should be equal to the probability that Trump wins re-election. So, if you think there’s a 52% chance of Trump winning, then TRUMP should trade at $0.52.”

As the crypto market continues to chase mainstream finance and the products it offers, traders can expect more elaborate trading products like TRUMP in the future. As part of a similar movement, FTX recently launched Bitcoin options trading in January 2020.

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