So you and your buddy (classmate? colleague? girlfriend? boyfriend? dad? cousin? boss??) have been following a couple of investments lately. Let's say they are both stocks (Asset Type) Apple or AAPL (Symbol) and Google or GOOGL (Symbol), both listed on NASDAQ (Price Source).
You think today, from 11 am EST (Trade Start Time) to 4 pm EST (Trade End Time), AAPL (Asset #1) will do better than GOOGL (Asset #2) meaning AAPL will have a higher price increase, or a lower price decline, or stay even while GOOGL declines.
But you don't want the hassle and expenses of buying AAPL and shorting GOOGL. So you tell your buddy: I think AAPL will do better than GOOGL from 11 am to 4 pm EST today, but I challenge you to prove me wrong. So why don't you pay me the plus/minus percentage return (based on price increase/decrease) on AAPL from 11 am to 4 pm EST today and I will pay you the percentage return on GOOGL for the same time period? If I'm wrong then I will have to pay you more money than I will receive from you and you will have net profit. Let's use $500 as the Notional Amount for calculating how much we will have to pay each other based on the percentage two stock prices from 11 am to 4 pm EST. But no matter what, neither of us will pay more than $100 as net payment (Maximum Net Cash Payment).
Your buddy thinks you're wrong and he accepts your challenge to prove you wrong and make net profit.
Then, from 11 am to 4 pm EST, AAPL price increased by 2% from $100 to $102 and GOOGL price increased by 2.5% from $600 to $615. Since you agreed to receive from your buddy the return on AAPL, you will receive 2% (AAPL price increase) of $500 (Notional Amount) or $10.00. And since you agreed to pay your buddy the return on GOOGL, you will pay 2.5% (GOOGL price increase) of $500 or $12.50. So you will pay your buddy $12.50 - $10.00 = $2.50 net. This is under the $100 maximum net cash payment and so payable in full.
CP #1 (Counter Party #1): The one who chooses both the investments and the time period(s), creates the trade challenge (the bet), sends it out to his contacts for someone to accept the challenge, and, after the trade ends, manually enters (fills in) the starting and ending prices for both the assets to settle the trade. *CP #1’s Name, Phone Number and Email Address will be displayed to all recipients or viewers of the trade challenge sent out or posted by CP #1.
CP #2 (Counter Party #2): The one who accepts the trade challenge. *CP #2’s Name, Phone Number and Email Address as provided will be displayed to CP #1 after the trade challenge is accepted.
Asset #1: If this does better than Asset #2, CP #1 wins the trade challenge.
Asset #2: If this does better than Asset #1, CP #2 wins the trade challenge.
Trade Start Time: The start of the trade time period(s) for Asset #1 and Asset #2. *Maybe different for each asset.
Trade End Time: The end of the trade time period for Asset #1 and Asset #2. *Maybe different for each asset.
Start Time Price: The prices of Asset #1 and Asset #2 at Trade Start Times. *Have to be manually entered (filled in) by CP #1 after the trade ends.
End Time Price: The prices of Asset #1 and Asset #2 at Trade End Times. *Have to be manually entered (filled in) by CP #1 after the trade ends.
Notional Amount: This is used to calculate the gross cash payments to each other and the net cash payment by the loser to the winner. For example, if the price of Asset #1 does better than the price of Asset #2 by 10% (the net difference in percentage price increase/decrease in both the assets is 0.100 in favor of Asset #1), and if the Notional Amount is $1,000, then the CP1 will receive 10(%) of ($)1000 (0.100 × 1000) or $100 from CP2.
Maximum Net Cash Payment: This is the maximum amount the loser will pay the winner regardless of the actual amount lost.