# Fees

Divergence v1 introduces highly customizable options pools. Each has its own underlying, collateral, expiry, and strike price. Once options expire, a pool's address cannot be reused to deploy a new pool. It is impractical to enable different fees for each pool, due to the issue of liquidity fragmentation. Therefore, fees are configured based on the underlying asset. 

It is expected that traders and liquidity providers favor certain fee levels for options with common underlying assets. Option pools with rarer underlying will naturally prefer a higher fee, to counterbalance market-making risks.

### Transaction Fee <a href="#swap-fees" id="swap-fees"></a>

Transaction fees are proportionally divided among active liquidity at the time of a trade. If the option price leaves a position's range, that liquidity no longer earns fees. If the options price reenters the range, the liquidity starts earning fees again. Liquidity providers collect fees separately from the pool.

Pools have a default transaction fee of 0.3% per notional. That means, for each option token sold, a transaction fee of 0.003 collateral units applies. More fee rates of up to 1% may be added in the future per on-chain governance.&#x20;

### Exercise Fee <a href="#swap-fees" id="swap-fees"></a>

After settlement, those options that expire profitably can be exercised for 1 collateral each. An exercise fee of 0.15% applies when option holders claim payoffs. This fee rate does not apply to liquidity providers, who can keep their received premiums from out-of-money options.&#x20;

### Protocol Fee <a href="#swap-fees" id="swap-fees"></a>

The protocol collects 30% of the transaction fee, as well as the exercise fee. The protocol governance has flexibility in changing the fraction of fees that go to the protocol.