The option
| Term | Meaning |
|---|---|
| Option | A right to make a specified exchange before a deadline. The buyer pays for that choice. |
| Call option | In this product, the right to receive the specified collateral token by paying the settlement token at the agreed rate. |
| American-style | The buyer may exercise at any time before expiry, subject to the transaction completing successfully. It does not mean exercise is automatic. |
| Buyer | The participant who purchases the option and decides whether to exercise. |
| Writer | The participant who commits collateral and sells the exchange right to a buyer. Also called a liquidity provider in these guides. |
| Position | The rights or obligations a participant holds in a particular series. |
| Notional or option amount | The amount of collateral token covered by the option. It is different from the premium. |
| Exercise | Using some or all of the option right by paying the required settlement tokens and receiving the corresponding collateral tokens. |
| Expiry | The exact timestamp at which unused exercise rights end. |
Market terms
| Term | Meaning |
|---|---|
| Market or series | A set of options sharing fixed terms, including the token pair, exchange rate and expiry. |
| Strike rate | The agreed exchange rate used for exercise. |
| Premium | The upfront price of buying the option. |
| Gross premium | The full premium paid by the buyer before it is divided between the protocol and writers. |
| Writer premium | The writer’s share of the gross premium after the protocol share. |
| Blended premium | The average premium percentage when a purchase fills offers at more than one price. |
| Basis point or bps | One hundredth of a percentage point. 100 bps equals 1%; 180 bps equals 1.8%. |
| Tick or premium increment | The permitted step between premium percentages in a market. |
| Offer or lot | An amount a writer makes available at a chosen valid premium. |
| Fill | The portion of an offer purchased by a buyer. |
| Liquidity | The amount currently available in eligible writer offers. |
| Minimum amount | A market’s required minimum for a new offer or purchase. Rules also apply to an unsold remainder after cancellation. |
Tokens and balances
| Term | Meaning |
|---|---|
| Collateral | Tokens committed to fulfil the buyer’s rights. |
| Collateral token | The token writers deposit and buyers receive when exercising. Purchase premiums use this token too. Called BASE in technical materials. |
| Settlement token | The token buyers provide when exercising. Called STRIKE in technical materials. |
| Base | The blockchain network used by the protocol. This is different from uppercase BASE, the token role in technical documents. |
| Vault | A contract holding the collateral for one series and accounting for each writer’s balance. |
| Locked collateral | Funds committed to offers or sold obligations and unavailable for withdrawal. |
| Withdrawable collateral | Unlocked funds that the writer can withdraw, subject to the vault’s normal checks. |
| Escrow | A separate holding contract that records funds claimable by each recipient. |
| Claim | Collecting an earned premium or exercise payment from its escrow into the recipient’s wallet. |
| Release | Unlocking collateral backing unused sold rights after expiry. A withdrawal is a separate action. |
| Full collateralisation | The promised collateral is committed in advance. This does not guarantee token value or eliminate all risks. |
Transactions
| Term | Meaning |
|---|---|
| Approval | Permission for a specified contract to spend a specified token from your wallet. It is not the purchase or exercise itself. |
| Network fee or gas | The blockchain transaction cost, separate from an option premium. |
| Maximum premium | The highest total premium the buyer authorises for a purchase transaction. |
| Transaction deadline | The latest time allowed for that purchase transaction to execute. It is different from the option’s expiry. |
| Revert | A transaction failure that rolls back its contract state changes and token transfers. A network fee may still be charged. |
| Confirmed transaction | A transaction recorded in a block. Check that its receipt shows success as well as confirmation. |
| Allowlist | The record of wallets permitted to enter as buyers or writers. |