Passport options

A passport option gives the holder a zero-strike call option on the value of a trading account.

Example of a passport option

Today is 19th October 2022. The Bitcoin price is at USD 19'000. The Ethereum price is at USD 1'300.

Bob buys a passport option to trade BTC and ETH till year-end

Bob pays USD 120'000 to have a right to open positions of up to USD 1'000'000 notional (notional is calculated at the market price at the moment of the trade) till 20th December 2022. This is the maximum he could lose.

Bob doesn't pay any commissions for trades, and he doesn't need any additional collateral to secure positions under the passport option. The number of trades is unlimited (he can trade as often as he needs).

Bob goes long using all available buying power to buy perpetual futures on BTC:
Buy 52.63 BTC (1'000'000 / 19'000) at USD 19'000.

26th October 2022. The Bitcoin price is at USD 17'000. Ethereum price is at USD 1'100.
Bob decides to switch positions from BTC to ETH (sell BTC back and buy ETH) using all available buying power:
Sell 52.63 BTC at 17'000
Buy 909.09 ETH (1'000'000 / 1'100) at 1'100

16th November 2022. The Bitcoin price is at USD 24'500. Ethereum price is USD 1'950.
Bob decides to close the position in ETH (sell ETH back) and turns short using half of his available buying power:
Sell 909.09 ETH at 1'950
Sell 256.41 ETH (500'000 / 1'950) at 1'950

7th December 2022. The Bitcoin price is at USD 19'000. Ethereum price is USD 1'300
Bob decides to open a short position in BTC (sell BTC) using the rest of his available buying power (USD 500'000):
Sell 26.31 BTC (500'000 / 19'000) at 19'000

30th December 2022. The Bitcoin price is at USD 11'200. Ethereum price is USD 700
Bob unwinds all positions before the expiry:
Buy 26.31 BTC at 11'200
Buy 256.41 ETH at 700

His profit is USD 99'958 (BTC) + USD 1'093'239 (ETH) = USD 1'193'197

Given premium paid his net PnL is USD 1'193'197 — USD 120'000 = USD 1'073'197

Option typePassport
UnderlyingPhinom BTH index, Phinom ETH index
Quote currencyUSDC
Expiry8:00 UTC of the Expiry date specified in contract
Buying powerUSD amount specified in contract
Quote periodAny date before 24h from Expiry
SettlementCash settled
Minimum price tick size0.01
Mininum contract sizeUSDC1000
Early terminationAvailable, at unwind price

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