Options Specs

TermsSpecifications

Underlying

Prices, rates, and events from a decentralized oracle can be accepted as underlying. In the initial phase the underlying whitelist includes: BTCUSD, ETHUSD

Strike Price

To avoid the “too-many-strikes” problem, inputs are rounded to two significant figures with precision up to 8 decimals. Examples: 1) a five-figure BTC price (27001.50) will round to the fourth figure (27000); 2) a four-figure ETH price (1799.50) will round to the third (1700); 3) a doge price (if supported at 0.071535) will round to (0.071)

Trading hours

24/7

Expiry

The contract supports the creation of pools with settlement at UTC 8:00. Daily, weekly, and monthly expiry selections are offered in the app interface for ease of interaction. Weekly and monthly expiries occur on UTC 8:00 on Fridays.

Collateral

Initially, a whitelist of ERC-20 tokens is supported as quote assets for digital options. This whitelist can expand as demanded by the community. Such a whitelist is necessary for this stage to detect any unforeseen issues and concentrate liquidity. It can be removed via admin functions of the smart contract. Collateral tokens of 18 decimals are supported by default. Those with other decimal places, while may be supported, are not recommended for use as collateral due to possible loss of computational precision. The initial whitelist includes WETH, USDT, DIVER, and Ditanic test coins.

Quotation

Options are quoted per unit of collateral, with a minimum price of 0.01 collateral and a maximum of 0.99 collateral. e.g., An options pool created using USDT will trade options from 0.01 to 0.99 USDT.

Settlement

Options tokens are exercised at expiry. Depending on the collateral in use, options are cash-settled when a stablecoin is used as collateral or physically settled when an asset token such as WETH is used as collateral. A fixed payout of 1 collateral unit is claimable per each in-the-money option. A call (Spear token) is in-the-money when the underlying price settles above or equal to the strike price; otherwise, a put (Shield token) is in-the-money. A liquidity position will pay out 1 collateral for each shorted in-the-money option. For each out-of-money option, liquidity providers can reclaim 1 reserved collateral.

Settlement Price

Underlying price feed via heartbeat updates provided by Chainlink. For more information, visit here.

Seed Deposit

For a liquidity position intended to sell 1 call (or 1 put) at the price of N collateral (0.01≤ N ≤ 0.99), the required collateral deposit is 1 - N. One can also seed 1 call (or 1 put) to a liquidity range above the current call (or put) price, to limit close this long exposure.

Reserved for Settlement

Anytime prior to expiry, liquidity can be removed from a position to finalize options exposure. A liquidity position can passively short both calls and puts, and collaterals must be reserved to pay off sold options, in case they expire profitably. The collaterals reserved for settlement equate to the larger short interest, be it on calls or puts; however, a liquidity provider's exposure is only limited to his net shorts in calls or puts, after offsetting call sales and put sales.

Position Limit

None

Minimum Size

None. (Each transaction costs gas, however)

Fees

Pools are set to a default transaction fee of 0.3% per notional. ie, for each option token sold, a flat fee of 0.003 collateral is applicable. An exercise fee of 0.15% is applied when a holder of an in-the-money option claims payoff at settlement. For more information, please refer to Fees.

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