Vault Terminology

This page outlines the various terms used to describe vault and option mechanics

Terminology
Description
Strike Price
The price at which the underlying asset can be bought and sold for. 
Underlying Asset
The asset that you are depositing into the option vault.
Tenor
Tenors refers to the duration or term life of the options contract.. Typically, in the context of structured products, investors would see a “weekly” or “bi-weekly” indicating the tenor of the options contract and there would be a countdown timer to mark the no. of days left before options contract expires.
Expiration
Expiry refers to the date/time where the option contract expires. Let's say the option contract starts on friday 8:30am UTC with a 1 week tenor. The option contract expires 1 week later on a Friday 8:30am UTC. the buyer (MMs) would have the right to exercise the option contract upon the option’s expiration date.
Epoch
Epoch refers to the different phases of an options contract. (And this is exclusive to DeFi Structured Products Protocols) The structured product protocol would first collect all the assets from investors before the start of a new epoch - deposit phase) 
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During the start of each epoch, an auction would occur where the different market makers would bid on the options contract sold by the protocol - “Auction in progress” phase. After a market maker has successfully bid on an options contract, they would have to send the premiums upfront to the protocol - “Settlement” phase. After settlement, a new options epoch is started - “in progress” phase.
Auction
Each option vault is selling option on behalf of vault users to whitelisted auction participants who are accredited market makers. During each auction, the auction participants would bid to buy the options. This auction is held off chain and the winner is assigned as the vault’s designated maker by the manager of the vault. Each option vault has a designated maker, who would then send the premiums into the option vault through a provided Web3 form. 


Thetanuts conducts a weekly auction every friday around 8:00am UTC to 11.30am UTC.
Settlement
Upon the expiration of the options contract (at the end of the tenor of the option vault), the settlement process would occur where the buyer (MMs) has the right to exercise the option contract if the option contract is “in-the-money”.  
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For a call option, if the market price is above the strike price upon expiration, the MMs would exercise the right to purchase the asset at the given strike price.  
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For a put option, if the market price is below the strike price upon expiration, the MMs would exercise the right to purchase the asset at the given strike price. 

Terminology	Description
Strike Price	The price at which the underlying asset can be bought and sold for.
Underlying Asset	The asset that you are depositing into the option vault.
Tenor	Tenors refers to the duration or term life of the options contract.. Typically, in the context of structured products, investors would see a “weekly” or “bi-weekly” indicating the tenor of the options contract and there would be a countdown timer to mark the no. of days left before options contract expires.
Expiration	Expiry refers to the date/time where the option contract expires. Let's say the option contract starts on friday 8:30am UTC with a 1 week tenor. The option contract expires 1 week later on a Friday 8:30am UTC. the buyer (MMs) would have the right to exercise the option contract upon the option’s expiration date.
Epoch	Epoch refers to the different phases of an options contract. (And this is exclusive to DeFi Structured Products Protocols) The structured product protocol would first collect all the assets from investors before the start of a new epoch - deposit phase) During the start of each epoch, an auction would occur where the different market makers would bid on the options contract sold by the protocol - “Auction in progress” phase. After a market maker has successfully bid on an options contract, they would have to send the premiums upfront to the protocol - “Settlement” phase. After settlement, a new options epoch is started - “in progress” phase.
Auction	Each option vault is selling option on behalf of vault users to whitelisted auction participants who are accredited market makers. During each auction, the auction participants would bid to buy the options. This auction is held off chain and the winner is assigned as the vault’s designated maker by the manager of the vault. Each option vault has a designated maker, who would then send the premiums into the option vault through a provided Web3 form. Thetanuts conducts a weekly auction every friday around 8:00am UTC to 11.30am UTC.
Settlement	Upon the expiration of the options contract (at the end of the tenor of the option vault), the settlement process would occur where the buyer (MMs) has the right to exercise the option contract if the option contract is “in-the-money”. For a call option, if the market price is above the strike price upon expiration, the MMs would exercise the right to purchase the asset at the given strike price. For a put option, if the market price is below the strike price upon expiration, the MMs would exercise the right to purchase the asset at the given strike price.

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Last modified 1yr ago