What is a token option?
The token option is a contract whereby the owner of the option (investor) has the right to purchase a token at a predetermined price for a certain length of time in the future. When an option holder calls, a startup must sell tokens at a fixed price. The availability of tokens and the transaction is guaranteed by a smart contract - fraud is impossible.
How will the option be sold? How will it be purchased?
The startup option and its purchase by the investor will be sold through the Tokenstarter platform. If the project conducts Crowdsale, then its options can be purchased on the platform of primary placement.
After Crowdsale, all options issued on the site are put on the stock exchange of options (by agreement with the start-up) where they can be freely sold or bought.
I want to invest in a startup. Why should I buy an option if I can buy the tokens directly?
Buying an option for a startup token, you significantly reduce your investment risks, thereby increasing the ROI of your investments.
How does the token option reduce risks?
You do not know the future market price of the token. Perhaps the project will not be implemented at all, and its tokens will turn into "garbage." But even in the case of a successful launch, the market price of the token may fluctuate unpredictably. Token options solve this problem. Buying an option, you get the right to buy tokens from the startup at a fixed price - no matter what the market price is during your contract time. In addition, you can at any time sell the option on the exchange - without waiting for the due date.
What is the benefit of the option?
If at the time of maturity, the market price of the token is higher than that fixed in the option - the profit is obvious! The investor purchases tokens at a price below the market and can instantly resell, earning the difference. Investors can also choose a waiting strategy for further growth of the rate and to earn even more.
If the market price turns out to be significantly lower than the option, investors may refuse to buy tokens. Thus, the losses are equal to the value of the option (which is less than the value of the token). If initially an investor bought the tokens instead of the option, he would lose the difference between the high buying rate and the low selling rate, or he would have to wait indefinitely until the rate rises again.
If the startup was unsuccessful or fraudulent - the investor does not buy tokens at the set time and loses only the cost of the option, and not the total cost of the tokens. The option can be sold on the exchange! At any time, an investor can exercise an option on the stock exchange of options, Tokenstarter.
Are token options issued before, during, or after Crowdsale?
During. The startup sells options in parallel with the sale of tokens.
Is the investor limited in time to buy tokens? Can he postpone the redemption of tokens for an arbitrary period?
No, the redemption is carried out until the end of the period specified in the terms of the option.
I'm a startup and I’m conducting a Crowdsale. Why do I need to issue token options if I can just sell my tokens?
How to understand what options to issue?
It should be understood that with the sale of one type of option, a startup receives financing in two stages:
Therefore, when issuing an option, one should start from the following parameters:
the schedule of costs for the project and the resulting funding requirement (distributed quarterly / monthly) - to set the date for redemption of the tokens by option
your forecast of the price of the token on the prospective date of their redemption on the option - in order to set the repurchase price, which may be profitable for investors
Depending on your needs, you can create several types of options with different terms and conditions for redemption.
The interface for issuing options does not require special knowledge, the release can be configured in your private office in a few clicks.
What will happen if the holders of options do not redeem the tokens in the options?
Token options will be "burned out," and the unredeemed tokens will be offered to investors according to the model of the Dutch auction, which will take place on the Tokenstarter platform. The price will decrease from 200% to 50% of the initial price within 14 days. Tokens that are not sold through this auction will be burned.
How to correctly assign an option value?
The cost of the option is determined by the price of the token and the forecast of that price, time (proximity to the deadline), whether a dividend yield is planned for the token (this is for example when monthly after the Crowdsale the holders of the token are paid a certain percentage). The strike price is the expected value of the token at the time of execution.
The further it is from the real price of the token to the moment of execution, the lower the premium. Such options are accompanied by increased risks, but it is less likely that in a short space the market price of the token will approach the strike price. Hence the low value of the premium paid. However, such options also have a high potential for profit. Therefore, they are of interest to investors, and some investors buy options with different execution prices, which helps them limit losses while maximizing profits.
back to homepage
What does the Tokenstarter platform consist of?
The Tokenstarter platform includes:
Option Contracts Constructor
Marketplace for initial options offering
Token options exchange
A platform for holding dutch auctions on non-purchased tokens