An option pool of a specific term. It is the core smart contract that interacts with user accounts. Users can call functions within the contract to long options, add and withdraw liquidity, and settle positions.


Liquidity providers deposit collateral to ensure they can cover short options positions in the event of option exercises at expiration.

Liquidity Provider

A liquidity provider is someone that sells (goes short on) options. Liquidity providers are compensated with transaction fees and premiums.

Defined Risk Positions

Defined risk positions offer a maximum profit and loss potential, while undefined risk positions can theoretically generate unlimited profit and loss. Digital options, by nature, are defined risk instruments that provide traders and liquidity providers with predetermined returns and risks.

In Range / Out of Range

If option price is within the price boundaries set by liquidity providers, the position is said to be in range and will earn tx fees and premiums. As the option price rises or falls, it may move outside the price boundaries. When the price goes beyond a position's lower or upper boundary, the position becomes out of range and no longer earns transaction fees or premiums.


Moneyness refers to the relative position of the current price of an underlying in relation to the strike price of the option. If the option would have positive value if it were to expire today, it is said to be "in the money" (ITM); if it would be worthless if expiring with the underlying at its current price, it is said to be "out of the money" (OTM); and if the current underlying price and strike price are very close, it is said to be "at the money" (ATM).

Long Position

Refers to options bought by traders with the expectation that they will rise in value.

Short Position

A liquidity provider creates a short position. They must select the lower and upper option sale prices, which represent the boundaries of the position.

Option Price

The price for digital options quoted in collateral units. At any given time, the call option price and the put option price shall always add up to one collateral unit.


Premium refers to the price paid by traders to liquidity providers for a digital call option or digital put option. It is the income received by liquidity providers for selling these options.

Option Tokens

Spears and Shields are tokenized digital call options and digital put options. They're minted as fungible tokens by the smart contract.


A European-style digital call option, with the right to receive one collateral when the settlement price of the underlying exceeds the strike price, otherwise, it expires worthless.


A European-style digital put option, with the right to receive one collateral when the price of the underlying asset settles below the strike price, otherwise, it expires worthless.

Open Interest

The total number of options positions that are opened and have not been exercised.


A third-party service or software that collects and updates the underlying asset prices used for settling options. The oracle receives asset prices during specified time slots and supplies them to smart contracts that use them to determine the settlement price of options.

Virtual Curve

A bonding curve that determines the price of options and facilitates the sale of those options.


The boundaries between discrete areas in price space. Ticks are spaced such that an increase or decrease of 1 tick represents a % increase or decrease in the option price.


Any interval between two price ticks of any distance.

Sales Volume

The gross number of call options and put options that a short position has sold.

(Net) Short Exposure

The net short status of an LP's open short position, after offsetting calls and puts that are sold.

Settlement Value

After expiration, the option seller (liquidity provider) will be assigned the obligation to payout one collateral unit for each option token he sold that expires in the money.

Last updated