​

How to buy lower and sell higher on Faven

Buying lower or selling higher on Faven means making a promise to trade at an agreed price on a set date. In return, you receive a payment upfront, called the premium. Buy lower and sell higher are called trades in Faven. In each trade, you choose:

1. the asset you want to buy or sell, from those available on Faven, like $wSOL or$SPCX tokenized stock
2. the price at which you want to buy or sell
3. how long you are willing to wait; the trade happens on the chosen date. The longer you wait, the higher the price
4. the quantity to buy or sell, aka the number of contracts. One contract represents one whole asset, such as 1 $wSOL.

​

Before you create a trade

Faven locks the assets needed to keep your promise. This is called collateral. It stays locked until the option expires or is settled.

• When you choose to sell higher, you lock the asset you want to sell. For example, selling one SOL locks 1 SOL.
• When you choose to buy lower, you lock the funds you need to use to buy the asset. For example, creating a contract to buy 3 SOL locks the USDC amount equal to 3 * the price at which you want to buy.

The premium for creating buy lower and sell higher trades is paid to you upfront, at the moment you lock the collateral. You keep it whether the trade happens or not. Market participants connected to Faven are willing to pay a premium for your buy and sell commitments backed by locked collateral. They are literally buying your price commitment whenever you reap a rally or buy a dip.

​

What happens at the end date

There are only two possible outcomes.

​

1. The price of the selected asset didn’t reach your target price

You get the locked collateral back in full, automatically, to the wallet from which you opened the trade. For example, if you opened a sell higher trade allowing someone to buy SOL at $200 and SOL ends below$200, there is no reason for them to use that option.

​

2. The price reaches your target

• For a sell higher, you sell the locked asset at the agreed price and receive the agreed USDC equal to the number of contracts * selected price.
• For a buy lower, you buy the asset at the agreed price using the locked funds. You get the exact quantity equal to the number of contracts in the trade.

You keep the premium you received when you opened the trade.

​

What to check before confirming

• Your locked amount: make sure you can leave these assets unavailable until expiration.
• The agreed price: this is the price you may sell or buy at if a trade happens.
• The end date: after this date, at 8:00 a.m. UTC, one of the two outcomes is decided—this is called settlement—and your collateral can be returned or used to buy or sell the selected asset in the trade.
• The premium: this is your upfront payment for taking on the obligation.

​

Important risk

The premium is what you get upfront, and depending on what your intent was—execute the trade or keep the collateral and continue collecting premium with the same collateral in the next trade—your risk is either the trade not being executed or the opposite trade being executed, respectively, to the two intents. Currently, it is not allowed to close a trade before its end date, and the trade collateral must be locked until the end date.

​

How is this even possible?

Faven trades are powered by options derivatives. Your opened trades, to buy lower or sell higher, are these option contracts, and you are the seller of the option contract. What does it mean for you? If the agreed trade would not benefit a buyer of your price commitment, the option you sold to that buyer expires unused—hence you get your locked collateral back. If the buyer chooses to use the option, Faven completes the agreed trade using your locked collateral. Important nuance: the buyer might still decide not to use the option contract you sold to them. In other words, if the target price is reached but the buyer has a reason not to execute your trade, it is their right. The trade will not happen, and you will get your collateral back in full, because there are only two possible outcomes.