Ok, so you have arrived on Vyper Protocol and want to trade $ARB. How does it work? Let’s distinguish between two scenarios
A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date. Both buyer and seller have to put up collateral because the price can be higher or lower than the strike, and this allows both parties to be protected.
Ok, so you have arrived on Vyper Protocol and want to trade $ARB. How does it work? Let’s distinguish between two scenarios: 1. You have received the airdrop and want to hedge it (sell the token before it’s live). 2. You are a speculator and want to profit from volatility
# Scenario 1: Hedging the airdrop
You have received ARB and are looking to sell, you don’t want to transfer the private key of your wallet to someone else (you should never do that) and you want to secure a certain price before the token is trading. You can use Vyper Protocol, let’s see in detail how it works.
You have 1000 ARB tokens and you want to sell for 1.50 USDC. You create a SELL order at 1.50 USDC for 1000 tokens, you also deposit 1'000 USDC. You get in touch with your friend who wants to buy the tokens, he clicks on BUY and he also deposits 1'000 USDC. The order is matched and the trade is executed. Note that only USDC were transferred, and the ARB tokens are still in your wallet.
At expiration, the final price of ARB is retrieved from Coingecko and the trade is settled at that price. If for example, ARB is trading at 1.80 USDC, the buyer will profit 300 USDC and the seller will lose 300 USDC. But remember, you still have 1000 ARB tokens in your wallet, which are now worth 1'800 USDC and that can be sold at any time. So 1'800–300 = 1'500 USDC, this implies you overall sold at 1.50$ per ARB which is what you wanted to achieve.
On the other hand, if the price of ARB is lower than 1.50 USDC — say 1.20 USDC — the buyer will lose 300 USDC and the seller will profit 300 USDC. But remember, you still own 1000 ARB tokens in your wallet, which are now worth 1'200 USDC and that can be sold at any time. So 1'200 + 300 = 1'500 USDC, this implies you overall sold at 1.50$ per ARB which is — again — what you wanted to achieve.
Remember, if you are hedging the airdrop, you want to sell before the token is live. If you sell after the token is live, you will be selling at the market price, which is not what you want to achieve.
# Scenario 2: Speculating on volatility
You might or might not have received the airdrop, but you want to speculate on the future value of the token. You can do that by buying the token at a certain price and selling it at a higher price. Just place your orders into the order book and wait for them to be filled (help us by sharing the link to your order on Twitter with others).
How does it work? It is very simple, you create a BUY order at 1.20 USDC for 1000 tokens and a SELL order at 1.70 USDC. Your profit will be equal to the selling price minus the buying price times the amount of contract. For example, if you do the trade with 1000 contracts — and both legs get filled — your profit would be 500 USDC.