This type of trading can also be done in reverse, where you are long BTC and have set limit sell orders awaiting them to be hit.
Let’s go over an example. You bought 1 BTC at an average price of 39300 and have set sell orders at an average price of 40000. You are looking to make a 800 USD profit (700 USD after fees).
You also enter into a BTC tix contract with 500 USD that for a yes to close above the strike price of 40000 that expires in 20 hours at the odds of 1.4x. If price settles below 40000 then you will make 200 USD, and your HXRO account will have 700 USD.
Now, let’s go through the various scenarios that can happen from the example above:
1. If price trends higher and closes above 40000 at the time of expiration of the tix contract above as your offers are filled, you will earn 700 USD from your spot account and will have lost 500 USD from your HXRO account (neglecting fees).
2. If price trends lower after and closes below 40000 at the time of expiration of the tix contract above AND Bitcoin fills your offers at the average price of 40000, you will earn a total profit of 900 USD from a net profit of 700 USD gained from buying BTC and selling it higher AND a net profit of 200 USD gained from the expiration of the product. This is by far the best possible scenario.
3. If price trends lower and closes below 40000 at the time of expiration of the tix contract above then you will have an unrealized BTC spot loss and a realized 200 USD profit from HXRO.