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After liquidity removal, a liquidity position's options exposure will finalize and no longer accrue new shorts on calls and puts. Later, liquidity providers can either wait until expiry to withdraw collaterals reserved for settlement if sold options expire worthless or close the short position right away by sending a matching amount of options tokens net shorted back to the pool.
The amount of options required for short closure equals the number of spears (calls) or shields (puts) net shorted, which is the difference between open call shorts and open put shorts, where:
- Open Call Shorts = calls sold - calls seeded
- Open Put Shorts = puts sold - puts seeded
Note: If open call shorts > open put shorts, the position net shorts on calls and will need to send back spears to the smart contract, and if open put shorts > open call shorts, the position net shorts on puts and will need to send back shields to the smart contract. Example here.
By closing the short position, you will also redeem a certain amount of collaterals in return, which also equals the difference between open call shorts and open put shorts.