Glossary
Last updated
Last updated
OLPs (Options Liquidity Pools): Liquidity Pools that trade as counterparties to traders' options requests based on assets provided by Liquidity Providers. They are divided into Short-term OLP, Mid-term OLP, and Long-term OLP based on expiry
OLP token: A token representing a share in OLP when providing liquidity. Staking OLP tokens allows Liquidity Providers to receive portions of protocol's earnings
Liquidity Provider: Users who supply liquidity to OLP and stake OLP Tokens to receive a share of the earnings generated by the protocol
OLPPV (OLP Position Value): The sum of the values of all Options Position Tokens held by OLP
OLPDV (OLP Deposited Value): The sum of assets deposited through Liquidity Providers in OLP
OLPTV (OLP Total Value): Total assets held by OLP
UR (Utility Ratio): The ratio of deposited assets in OLP used as collateral
Options: Options are financial derivatives that give the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price before or at the expiration date
Call Options: financial contract that grants the holder the right, but not the obligation, to purchase an underlying asset at a predetermined price within a specified time period
Put Options: financial contract that provides the holder with the right, but not the obligation, to sell an underlying asset at a predetermined price within a specified time frame
Strike Price: The strike price, also known as the exercise price, is the predetermined price at which the holder of an option can buy or sell the underlying asset
Expiry: Expiry refers to the expiration date of the option, beyond which the contract is no longer valid, and the holder loses the right to exercise it
ITM (In-The-Money) Options: When the current market price of the underlying asset is favorable for exercising the option, resulting in potential profit
ATM (At-The-Money) Options: When the underlying asset's current market price is approximately equal to the option's strike price
OTM (Out-The-Money) Options: When the current market price of the underlying asset is not favorable for exercising the option, resulting in potential loss if exercised
UA (Underlying Asset): Asset used as price reference for a specific options position
Strike Price: The strike price, also known as the exercise price, is the predetermined price at which the holder of an option can buy or sell the underlying asset
Expiry: Expiry refers to the expiration date of the option, beyond which the contract is no longer valid, and the holder loses the right to exercise it
Buy Position: Holding an options buy position token, indicating the right to buy (in the case of a call) or sell (in the case of a put) the underlying asset
Sell Position: Holding an options sell position token, obligating the seller to fulfill the contract terms if exercised
Futures Index: Reference price of UA, which is calculated based on the futures price of major CEXs and Oracle
Settlement Price: TWAP (Time Weighted Average Price) of UA during the 30 minutes prior to expiry
IV (Implied Volatility): A measure of potential price fluctuations in UA
Position Token: A Token that represents positions in Long/Short Call/Put options
Long Call Options Token Holder = Entity holding a Buy position for Call options
Long Put Options Token Holder = Entity holding a Buy position for Put options
Short Call Options Token Holder = Entity holding a Sell position for Call options
Short Put Options Token Holder = Entity holding a Sell position for Put options
Execution Price: Actual price of options when traders trade options. The execution Price is determined by the sum of the Model Price and Risk Premium
Mark Price: The theoretical price of options calculated using the Black76 formula based on real-time future price and implied volatility from major CEXs
Risk Premium:
Amount added to the Model Price when a trader requests a trade. It is calculated based on OLP's current Asset Utility Ratio and the level of Greeks, taking into account changes in the option's Greeks
Risk Premium is included in the Execution Price and is charged to the trader. 50% of the Risk Premium is paid to OLP as compensation for assuming position risk
Payoff: Amount of USDC/UA that Long Position Token holders can receive when options reach expiry
Settlement:
Process of calculating the final payoff of options after expiry and paying Long Position Token holders
Remaining collateral is redeemed to Short Position Token holders
Delta: Measures the sensitivity of the option's price to changes in the price of the underlying asset.
Vega: Measures the sensitivity of the option's price to changes in implied volatility
Gamma: Measures the rate of change of an option's delta in response to changes in the price of the underlying asset
Theta: Measures the sensitivity of an option's price to the passage of time, representing time decay
Rho: Measures the sensitivity of an option's price to changes in interest rates