Buying a call option gives the right to buy the underlying asset at the strike price upon option expiry.
Buying a put option gives the right to sell the underlying asset at the strike price upon option expiry.
Selling a call option creates an obligation to sell the underlying asset at the strike price upon option expiry to the buyer of the call option. In exchange for selling the call option, writers (or sellers) receive an option premium.
Selling a put option creates an obligation to buy the underlying asset at the strike price upon option expiry to the buyer of the put option. In exchange for selling the put option, writers (or sellers) receive an option premium.
The asset in which a derivative instrument (i.e. an option) is based off of.
The price at which the underlying asset can be bought or sold once an option is exercised.
The length of time until option expiry. In the context of the Basic Vaults, users would see "Weekly" or "Bi-weekly" - indicating the tenor of option, along with a countdown to option expiry.
Options that may only be exercised at the expiration date of the option, i.e. at a single pre-defined point in time.
The process of fulfilling the terms of an options contract when the option is exercised — options may either be cash-settled or physically-settled.
In the context of the Basic Vaults, the option contract buyer (i.e. accredited market maker) will have the right to exercise the option contract if it is in-the-money ("ITM").
Settlement type that involves the delivery of the net cash amount on the settlement date of the options contract.
Settlement type that involves the physical delivery of the underlying asset (i.e. $ETH) on the settlement date of the options contract.
An epoch is a period of time in which a Basic Vault is run. For a Basic Vault with Weekly tenor, each epoch will run for a period of one week.
An epoch is split into a few distinct phases:
Deposit Phase: The Basic Vaults collect deposits from users, or roll-over deposits that users have had from the previous epoch.
Auction in progress: At the start of each epoch, Thetanuts Finance conducts a blind auction where accredited market makers bid to buy option contracts sold by the Basic Vaults.
Settlement: The winning market maker of each Basic Vault then proceeds to deposit the option premiums upfront into the Basic Vault.
In Progress: After settlement, the epoch begins.
$XYZ-C (Call Basic Vault LP Token) and $XYZ-P (Put Basic Vault LP Token) represent fungible and transferrable tokenized Basic Vault positions – and form the backbone of all trading strategies on Thetanuts Finance v3.