FAQs

Why Globus Wealth ?

Like many other financial products providers, the first limit is around regulation. There are certain regulations that are not fit for modern technology, options trading in general, or providing the client with the best possible outcome . Some of the current regulations were simply created in a different time, without consideration of all available technology available. As an example, most funds today must have a custodian and fund administrator by law.

A custodian typically acts as safe-keeper of the fund’s assets and the fund administrator typically takes care of accounting, auditing, risk management, compliance (KYC/AML), investments/redemptions and regulatory reporting.

On top of that, it is pretty standard practice that for every investment professional in a medium-sized investment fund, there will be four non-investment professionals (ie. legal, support, operational, fund-administrator focused, trade reconciliation, custody, risk management, auditing… and the list goes on). These are a-lot of mouths to feed that take away from client gains.

Globus automates the fund administration and support function entirely by smart-contract code and allow investors to own verify custody of their asset backed contracts at all times.

There is no reason why regulation shouldn’t catch up to technology.

Another limitation is that today, the range of traditional investment fund assets, like fiat currencies and equities, aren’t available on a blockchain. A fund that operates in a technology regulated environment will have to use modern digital assets and can’t deal solely with paper-based certificates.

However, traditional assets are fast becoming modernized and we’re just getting started.

It’s just a matter of time before every asset class we know will be digital simply because it is more efficient, transparent and secure. In which case, it’s not too long until we can imagine a financial management world which is entirely run by digital rule-sets and transparent processes. This is our main focus at Globus. Allowing the technology and computers to drive the success.

The New Paradigm

Technology today is emerging left, right and center in an attempt to gain investment exposure to this new class of technology innovators.
The irony is, that despite all the new technology surfacing, new funds can be even more expensive to set up and run than traditional funds. This can be seen in some of the fees they are charging. It is typical to see higher fee structures for technology based funds than traditional asset funds. You will not see that here.

A large part of these high costs are related to the fact that investment fund regulations have been created for the “old world” and simply don’t account for or understand technology like algorithms. This means that new financial product launches are having to squeeze into existing rules and regulations designed for a different system.

We have done this through the use of Derivatives.
The hybrid investment vehicle like ours are likely to be the first to shift, but there’s no doubt that when traditional funds see evidence of how much they can trim their everyday cost basis and pain-points, they’ll be quick to follow.

Options and Derivatives have proven to work. Combine that with smart technology and we have a winning formula of predictable income every successful investor desires.

What are Globus Derivative Bond Contracts?

Smart Contracts are a new asset class (capital asset) that has captured public attention in some cases because of outsized increases in value, but overall because of the extraordinary transparency advantages blockchain technology brings to a new era of financial products, that provide purchaser centric returns in a safer more transparent environment than outdated traditional methods such as 401K, IRA, Mutual Funds, Bond Funds, or Hedge Funds through asset backed bond option contracts.

DBC1 are asset backed Derivative Contracts that have created a new paradigm in wealth management overall. DBC’s are alternative investment value storage contracts, creating vested interest smart derivative bond option contracts to beneficiaries of DBC. The DBC2 is linked directly to the DBC1 and the ultimate DBC1/DBC2 beneficiary. DBC1 are sold by the Globus contract issuer, Globus Wealth, registered in Puerto Rico, USA. The proceeds of the DBC1’s sold are used to buy bonds from Globus Financial, registered in Puerto Rico USA. Globus Financial facilitates a rule based “BLACKBOX” investment strategy algorithm through the management, Winning Technology. This strategy consists of investing in equities, ETF’s, options for income generation, and other appropriate investments (and derivatives linked thereto) to generate the increased value of the DBC for the DBC beneficiary at a predetermined fixed rate 12.5% over a predetermined contract vesting period.

What are the benefits to beneficiaries and contract owners?

The transferability, market independence, liquid nature, and the Winning Technology algorithmic strategy as projected and the beneficiary’s vested rights allowing for compounding through interest in DBC 1/2 prove to be a safe haven for smart investors far surpassing any benefits the realestate or traditional hard money investing industries can achieve. The option to compounded capital growth via DBC2 and incurring capital gains only when exercised, makes DBC a superior product above traditional real estate investing, mutual funds, hedge funds, bonds, or self-managed trading.

As people, businesses, and governments use the blockchain for full accountability and transparency, demand for applications and products increase and become mainstream. Our experience is that this demand for and combined with immutable transparency of blockchain publishing similar investment vehicles will experience a massive explosion of adaptation globally.

Globus believes, that through the DBC1 and the linked DBC2 and DBC3, it will be the predominant leader in the field of “Smart Contracts” as an alternative investment vehicle for smart investors to find growth through technology and the implementation of DBC’s that grow and compound fixed over time, fully backed by transparent liquid assets.

The use of DBC-smart contracts to realize an underlying value increase over time for contract beneficiaries is a unique approach. In addition to investing in traditional options strategies, DBC’s will be among the first vehicles of its kind to build what Globus views as a transparent, secure, asset backed contract as a vested interest based solution. Globus is using the most advanced proprietary technology, blackbox strategies with above industry average rates of return, that mathematically are proven to compound overtime.

Can you explain this in layman's terms?

In layman terms you can think of it like this, clients looking for long term wealth management solutions are buying “vault spaces” with stored value in Globus in the form of an “Option Contract”. Globus is in the business of selling and managing vaults (Contracts) for these clients and finding companies that can add value to the contents of these vaults (Contracts). For example Globus Wealth could loan money to a mining company to mine gold, using the stored value in the vaults as a means to finance this. Instead of mining in physical commodities like Gold, the actual strategy of Globus Financial is to work with a company that mines the stock market. The preferred partner for Globus to realize this is Winning Technology. Globus Wealth uses proceeds of the contract offering to purchases Bonds (asset backed) from Globus Financial, for the sole purpose of mining the stock market. The Globus Financial’s broker account is used as collateral for the loan and the CNAV is always managed to the DBC1 original value.

Just like the gold mining company (Globus Financial) uses the bonds sale capital to mine for gold (stock market options) with the land and equipment (broker account) as collateral. Globus Financial the “gold mining company” mines the gold in the form of option premiums. As Globus pulls gold out of the earth (weekly stock premium) it increases value at a fixed 12.5% to DBC1 for Globus Wealth. Globus Wealth holds in the vault for the ultimate beneficiaries in the form of a secondary note called a Derivative Bond Contract. The value of this DBC1 contract is fixed and DBC2 contracts grows at 12.5% compounded. The interest in these contracts and beneficiary rights is vested until exercised. In the gold mining context you are receiving a fixed amount of the gold pulled out of the ground in this case the stock market. The biggest benefit is the growth over time and the fact these contracts are tradable. This means you can sell your BDC2 12.5% contract (DBC2) based on the fixed future value, today for the increased value. The entire process is managed by Winning Technology who is only paid on success fees after all the contracts are allocated, DBC3 is issued for Winning Technology and creates another value add to the DBC2 secondary market that can all be traded via the exchange book of the Globus website. Because all of these contracts are published to the blockchain they are immutable and fully transparent generating instant trust where verification is visualized in your Globus Vault.

What other products like this are out there?

Globus is among the first unlocking the asset backed, “Derivative Bond Contract” wave by utilizing the blockchain for full transparency providing a cost effective investment vehicle that allows more return to the smart investors, where they always take the first position on returns.

What is the Globus strategy?

The Globus Financial investment strategy includes purchasing stocks and ETF’s on the US stock market as an investment and then selling options to generate income. The value of DBC2 will be directly based on the initial DBC1 through a fixed option vested interest contract allocated in 20+ contracts with each contract representing a future option vesting date and value. The DBC2 smart contracts can be vested for the full 20 years, compounding in value at the rate of 12.5% annually. The vested contract value is paid from income that Globus Financial earns from investing in and trading options, as outlined in “Overview” of this summary on the next page.

Globus will use Winning Technology and their proprietary algorithmic strategies and rule based management to filter and invest in sound fundamental companies that can survive a significant market decline and recover over time. These income producing opportunities are derived through advanced data driven trading strategies following the mathematics and algorithms licensed from Ron Groenke, a renowned trading expert, mathematician, and a well know author on the subject.

The DBC2 contracts will have a 20 year option vested interest period extendable 20 years. For example a DBC2 #1 contract based on a $1,000,000 DBC1 purchase price, has a future exercise value of $1,172,000 million in 20 years. This is the perfect product for legacy wealth. Let’s say you want to leave your newborn grandson $1,000,000 now. The legacy 40 year value of this DB2/1 is $12,000,000 million for just the first DBC2#1 contract. That is the value of only 1 contract, you are issued 20+. Now on the other hand if you were looking for fast liquidation and capital gain on your $1M initial investment. You could potentially sell a DBC2#1 over the DBC1 and DBC2 price of $1 million that has a future value of $2.17 million in 20 years to another beneficiary. Anything above the amount you sell the DBC2#1 for over $1 million puts you at a 0 risk position and cash positive from Y2 if sold. All future DBC2 beneficiary contracts still remain and are tradable as well. A strong marketplace and a “smart investor” can create multiples with a buy and sell or a long hold that cannot be achieved with any other product we know of.

Winning Technology’s success fees are paid through a tradable DBC3 options contract only after DBC2 growth is allocated and accounted for.

The total DBC1 and DBC2, 20 year contract value is $10,545,000 on a $1,000,000 purchase while the legacy 40 year value is a staggering $101,000,000 at exercise.

Can you trade or sell Globus contracts ?

To start we will only exchange using our own internal protocols. Accredited investors must exchange with other accredited investors. You can also assign contract beneficiaries and make restriction son redemption to your beneficiaries.

Does Globus have plans to allow exchanges in the near future?

We are be doing our best to increase our market presence, including creating a bid ask internal book with in the next year.

Are there any reviews on the historical trading results?

Yes, we publish updates monthly here: (link to results)

NAV and current account valuation will be published in your private vault.

Are Globus contracts securities?

Based on legal advice and opinions we gathered during the preparation process, Globus Wealth DBC contract may be deemed as derivative securities. We pay a lot of attention to that matter and are in continuous communications with US attorneys while formalizing our position.

According to the SEC . https://www.sec.gov/fast-answers/answersderivativehtm.html

Derivatives

Derivatives are financial instruments whose performance is derived, at least in part, from the performance of an underlying asset, security or index. For example, a stock option is a derivative because its value changes in relation to the price movement of the underlying stock.

 

Are Globus Contracts only allowed in the USA?

During 2019-20, on the platform we should be able to sell contracts to citizens of all countries that derivatives are legal.

What is the timeline for contract purchases?

Contracts should be published on the block chain no longer than 6-12 months from purchase. Once the contracts are sold we will not generate new contracts.  There is a limited amount dollar amount of contracts we will sell.

What are the advantages of derivatives?

According to Investopedia: https://www.investopedia.com/terms/d/derivative.asp

A derivative is a financial security with a value that is reliant upon or derived from, an underlying asset or group of assets (a benchmark). The derivative itself is a contract between two or more parties, and its price is determined by fluctuations in the underlying asset. The most common underlying assets include stocksbondscommoditiescurrenciesinterest rates, and market indexes.

 

What Is a Derivative?

A derivative is a financial security with a value that is reliant upon or derived from, an underlying asset or group of assets (a benchmark). The derivative itself is a contract between two or more parties, and its price is determined by fluctuations in the underlying asset. The most common underlying assets include stocksbondscommoditiescurrenciesinterest rates, and market indexes.

What is a Derivative?
 Melissa Ling {Copyright} Investopedia, 2019.

These assets are commonly purchased through brokerages (Investopedia offers a list of the best online brokers).

Derivatives can either be traded over-the-counter (OTC) or on an exchange. OTC derivatives, which constitute a greater proportion of derivatives, generally have greater counterparty risk (the likelihood that one of those involved in a transaction might default) than exchange-traded derivatives, which are standardized and more heavily regulated.

 

The Basics of a Derivative

Originally, derivatives were used to ensure balanced exchange rates for goods traded internationally. With differing values of national currencies, international traders needed a system to account for these differences. Today, derivatives are based upon a wide variety of transactions and have many more uses. There are even derivatives based on weather data, such as the amount of rain or the number of sunny days in a region.

For example, imagine a European investor, whose investment accounts are all denominated in euros, who purchases shares of a U.S. company through a U.S. exchange using U.S. dollars. This investor is exposed to exchange-rate risk while holding that stock. If the value of the euro rises relative to the dollar, any profits the investor realizes upon selling the stock become less valuable when they are converted into euros. To hedge this risk, the investor could purchase a currency derivative to lock in a specific exchange rate. Derivatives that could be used to hedge this kind of risk include futures and currency swaps.

A speculator who expects the euro to appreciate compared to the dollar could profit by using a derivative that rises in value with the euro. When using derivatives to speculate on the price movement of an underlying asset, the investor does not need to have an interest in the underlying asset.

KEY TAKEAWAYS

  • Derivatives are securities that derive their value from an underlying asset or benchmark.
  • Common derivatives include futures contracts, forwards, options, and swaps.
  • Most derivatives are not traded on exchanges and are used by institutions to hedge risk or speculate on price changes in the underlying asset.
  • Exchange-traded derivatives like futures or stock options are standardized and eliminate or reduce many of the risks of over-the-counter derivatives
  • Derivatives are usually leveraged instruments, which increases their potential risks and rewards.

 

Common Forms of Derivatives

There are many different types of derivatives that can be used for risk management or for speculation. Here are several of the most common.

Futures

A futures contract (or simply, futures) is an agreement between two parties for the purchase and delivery of an asset at an agreed upon price at a future date. Futures are exchange-traded, and the contracts are standardized. Traders will use a futures contract to hedge their risk or speculate on the price of an underlying asset.

For example, say that on Nov. 6, 2019, Company-A buys a futures contract for oil at a price of $62.22 per barrel that expires on Dec. 19, 2019. The company wants to do this because it needs oil in December and is concerned that the price will rise before the company actually needs to make the purchase. Buying an oil futures contract hedges the company’s risk because the seller on the other side of the contract is obligated to deliver oil to Company-A for $62.22 per barrel once the contract has expired. Assume oil prices rise to $80 per barrel by Dec. 19, 2019. Company-A can accept delivery of the oil from the seller of the futures contract, but if it no longer needs the oil, it can also sell the contract before expiration and keep the profits.

In this example, it is possible that both the futures buyer and seller were hedging risk. Company-A needed oil in the future and wanted to offset the risk that the price may rise in December with a long position in an oil futures contract. The seller could be an oil company that was concerned about falling oil prices and wanted to eliminate that risk by selling or “shorting” a futures contract that fixed the price it would get in December.

It is also possible that the seller or buyer (or both) of the oil futures contract were speculators with the opposite opinion about the direction of oil in November and December. If the parties involved in the futures contract were speculators, it is unlikely that either of them would want to make arrangements for delivery or shipment of crude oil. Speculators can end their obligation to purchase or deliver the underlying commodity by closing their contract before expiration.

For example, the futures contract for West Texas Intermediate (WTI) oil that trades on the CME represents 1,000 barrels of oil. If the price of oil rose from $62.22 to $80 per barrel, the trader with the long position (buyer) in the futures contract would have profited $17,780 [($80 – $62.22) X 1,000 = $17,780], and the trader with the short position (seller) in the contract would have lost $17,780.

Not all futures contracts are settled at expiration by delivering the underlying asset. Many derivatives are cash-settled, which means that the gain or loss in the trade is a positive or negative cash flow to the trader. Futures contracts that are cash settled include many interest rate futures, stock index futures, and more unusual instruments like volatility futures or weather futures.

Forwards

Forward contracts (or “forwards”) are similar to futures, but they are not traded on an exchange, only over-the-counter. When a forward contract is created, the buyer and seller may have customized the terms, size and settlement process for the derivative. As OTC products, forward contracts carry a greater degree of counterparty risk for both buyers and sellers.

Counterparty risks are a kind of credit risk in that the buyer or seller may not be able to live up to the obligations outlined in the contract. If one party of the contract becomes insolvent, the other party may have no recourse and could lose the value of its position. Once created, the parties in a forward contract can offset their position with other counterparties, which can increase the potential for counterparty risks as more traders become involved in the same contract.

Swaps

Swaps are another common type of derivative, often used to exchange one kind of cash flow with another. For example, one might use an interest rate swap to switch from a variable interest rate loan to a fixed interest rate loan, or vice versa.

Imagine that InvestCo, Inc. has borrowed $1,000,000 and pays a variable rate of interest on the loan that is currently 6%. InvestCo may be concerned about rising interest rates that will increase the costs of this loan or encounter a lender that is reluctant to extend more credit while InvestCo has this variable rate risk.

Assume that InvestCo creates a swap with FixedCo, Inc., which is willing to exchange the payments owed on the variable rate loan for the payments owed on a fixed rate loan of 7%. That means that InvestCo will pay 7% to FixedCo on its $1,000,000 principal, and FixedCo will pay InvestCo 6% interest on the same principal. At the beginning of the swap, InvestCo will just pay FixedCo the 1% difference between the two swap rates.

If interest rates fall so that the variable rate on the original loan is now 5%, InvestCo will have to pay FixedCo the 2% difference on the loan. If interest rates rise to 8%, then FixedCo would have to pay InvestCo the 1% difference between the two swap rates. Regardless of how interest rates change, the swap has achieved InvestCo’s original objective of turning a variable rate loan into a fixed rate loan.

Swaps can also be constructed to exchange the risk of default on a loan or cash flows from other business activities. Swaps related to the cash flows and potential defaults of mortgage bonds are an extremely popular kind of derivative—a bit too popular, in the past. It was the counterparty risk of swaps like this that eventually spiraled into the credit crisis of 2008.

Options

An option is similar to a futures contract in that it is an agreement between two parties to buy or sell an asset at a predetermined future date for a specific price. The key difference between options and futures is that, with an option, the buyer is not obliged to “exercise” his agreement to buy or sell—it’s an opportunity, not an obligation (as a futures contract is). As with futures, options may be used to hedge or speculate on the price of the underlying asset.

Imagine an investor owns 100 shares of a stock worth $50 per share that she believes will rise in value in the future. However, this investor is concerned about potential risks and decides to hedge her position with an option. The investor could buy a put option that gives her the right to sell 100 shares of stock for $50 per share (strike price) until a specific day in the future (expiration date).

Assume that the stock falls in value to $40 per share by expiration and the put option buyer decides to exercise her option and sell the stock for the original strike price of $50 per share. If the put option cost the investor $200 to purchase, then she has only lost the cost of the option ($200) because the strike price was equal to the price of the stock when she originally bought the put option. A strategy like this is called a “protective put” because it hedges the stock’s downside risk.

Alternatively, assume an investor does not own the stock that is currently worth $50 per share; however, he believes that the stock will rise in value over the next month. This investor could buy a call option that gives him the right to buy the stock for $50 before or at expiration. Assume that this call option cost $200 and the stock rose to $60 before expiration. The call buyer can now exercise his option and buy a stock worth $60 per share for the $50 strike price, which is an initial profit of $10 per share. A call option represents 100 shares, so the real profit is $1,000 less the cost of the option for a net profit of $800.

In both examples, the put and call option sellers are obligated to fulfill their side of the contract if the call or put option buyer chooses to exercise the contract. However, if a stock’s price is above the strike price at expiration, the put will be worthless and the seller gets to keep the premium as the option expires. If the stock’s price is below the strike price at expiration, the call will be worthless and the call seller will keep the premium. Some options can be exercised before expiration (so-called “American-style” options), but early exercise is rare.

 

Advantages and Limitations of Derivatives

As the above examples illustrate, derivatives can be a useful tool for businesses and investors alike: a way to lock in prices, hedge against unfavorable movements in rates, and mitigate risks—often for little cost. In addition, derivatives can often be purchased on margin—that is, with borrowed funds—which makes them even cheaper, and their rate of return even greater (see the Real World Example, below).

On the downside, derivatives are difficult to value because they are based on the price of another asset. The risks for OTC derivatives include counterparty risks that are difficult to predict or value as well. Most derivatives are also sensitive to changes in the amount of time to expiration, the cost of holding the underlying asset and interest rates. These variables make it difficult to perfectly match the value of a derivative with the underlying asset.

Pros

  • Lock in prices
  • Hedge against risk
  • Can be leveraged
  • Diversify portfolio

Cons

  • Hard to value
  • Subject to counterparty default (if OTC)
  • Complex to understand
  • Sensitive to supply and demand factors

Also, since the derivative itself has no intrinsic value, it is vulnerable to market sentiment and market risk. It is possible for supply and demand factors to cause a derivative’s price and its liquidity to rise and fall, regardless of what is happening with the price of the underlying asset.

Finally, derivatives are usually leveraged instruments, and using leverage cuts both ways: It increases the rate of return, but also makes losses mount more quickly.

 

Real World Example of a Derivative

Many derivative instruments are leveraged. That means a small amount of capital is required to have an interest in a large amount of value in the underlying asset. For example, an investor who expects the S&P 500 to rise in value could buy a futures contract based on that venerable equity index of the largest U.S. publicly traded companies. The notional value of a futures contract on the S&P 500 is $250,000, but the Chicago Mercantile Exchange (CME) only requires $31,500 in a margin balance to maintain a long position in it (as of in 2019). This gives the futures investor a leverage ratio of approximately 8:1. The required margin to hold a futures or derivative position changes depending on market conditions and broker requirements.

Can external asset managers buy this product for protection?

Yes, Globus Wealth welcomes external investment from funds or money managers. Winning Technology will offer contracts to investment advisors and asset managers who’s clients purchase Globus Contracts or if they purchase on their behalf.

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