Market Maker Pricing Guide

This guide covers the MM pricing module, which provides market maker prices with fee adjustments and collateral carrying costs.

Table of Contents

• Overview

• Fee Adjustment Formula

• Collateral Carrying Cost

• Vanilla Option Pricing

• Structure Pricing

• Helper Functions

Overview

The MM pricing module fetches indicative prices from market makers and applies:

1. Fee Adjustment - Widens the bid-ask spread for exchange fees

2. Collateral Carrying Cost - Adds cost of capital for short positions

Importing

import {
  MMPricingModule,
  applyFeeAdjustment,
  calculateCollateralCost,
  parseTicker,
  buildTicker,
  COLLATERAL_APR,
} from '@anthropic/thetanuts-sdk';

Module Initialization

const client = new ThetanutsClient({ chainId: 8453 });
const mmPricing = client.mmPricing;

// Or standalone
const mmPricing = new MMPricingModule(httpClient, logger);

Fee Adjustment Formula

Market maker prices are adjusted to account for exchange fees:

feeAdjustment = min(0.0003, rawPrice × 0.125)

Applied to prices:

• Ask price: feeAdjustedAsk = rawAsk + feeAdjustment

• Bid price: feeAdjustedBid = rawBid - feeAdjustment

Example

import { applyFeeAdjustment } from '@anthropic/thetanuts-sdk';

// Raw bid/ask from market maker
const rawBid = 0.02;   // 0.02 ETH
const rawAsk = 0.025;  // 0.025 ETH

// Apply fee adjustment
const adjustedBid = applyFeeAdjustment(rawBid, 'bid');
const adjustedAsk = applyFeeAdjustment(rawAsk, 'ask');

// feeAdjustment = min(0.0003, 0.02 * 0.125) = min(0.0003, 0.0025) = 0.0003
// adjustedBid = 0.02 - 0.0003 = 0.0197
// adjustedAsk = 0.025 + 0.0003 = 0.0253

Why 0.0003 Cap?

The fee adjustment is capped at 0.0003 (0.03% of 1 contract) to prevent excessive widening for high-premium options. This matches the protocol's fee structure.

Collateral Carrying Cost

Short positions require collateral, which has an opportunity cost. The SDK calculates this based on:

• BTC collateral: 1% APR

• ETH collateral: 4% APR

• USD collateral: 7% APR

Formula

collateralCost = collateralValue × APR × timeToExpiry

Where timeToExpiry is in years.

COLLATERAL_APR Constants

import { COLLATERAL_APR } from '@anthropic/thetanuts-sdk';

console.log(COLLATERAL_APR);
// {
//   BTC: 0.01,  // 1%
//   ETH: 0.04,  // 4%
//   USD: 0.07,  // 7%
// }

Example

import { calculateCollateralCost } from '@anthropic/thetanuts-sdk';

// PUT option: 1 contract at strike 2000, 30 days to expiry
const collateralUsd = 2000;
const timeToExpiryYears = 30 / 365;
const collateralType = 'USD';

const cost = calculateCollateralCost(
  collateralUsd,
  timeToExpiryYears,
  collateralType
);
// cost = 2000 × 0.07 × (30/365) = $11.51

Spread Collateral Cost

For spreads, the collateral cost is based on the spread width (max loss), not individual legs:

import { calculateSpreadCollateralCost } from '@anthropic/thetanuts-sdk';

// CALL_SPREAD [2000, 2500]: width = 500
const widthUsd = 500;
const timeToExpiryYears = 30 / 365;

const spreadCC = calculateSpreadCollateralCost(widthUsd, timeToExpiryYears);
// spreadCC = 500 × 0.07 × (30/365) = $2.88

Vanilla Option Pricing

getAllPricing

Fetches all option prices for an underlying asset.

const allPricing = await mmPricing.getAllPricing('ETH');

// Returns: MMAllPricingResponse
// {
//   expirations: [
//     {
//       expiry: 1710547200,
//       expiryLabel: '16MAR24',
//       options: [
//         { strike: 1800, isCall: true, bid: 0.05, ask: 0.055, ... },
//         { strike: 1800, isCall: false, bid: 0.02, ask: 0.025, ... },
//         ...
//       ]
//     }
//   ]
// }

getTickerPricing

Fetches pricing for a specific option ticker.

const pricing = await mmPricing.getTickerPricing('ETH-16MAR24-2000-P');

// Returns: MMVanillaPricing
// {
//   ticker: 'ETH-16MAR24-2000-P',
//   underlying: 'ETH',
//   strike: 2000,
//   isCall: false,
//   expiry: 1710547200,
//   rawBid: 0.02,
//   rawAsk: 0.025,
//   feeAdjustedBid: 0.0197,
//   feeAdjustedAsk: 0.0253,
//   timeToExpiryYears: 0.0822,
//   ...
// }

getPositionPricing

Fetches pricing with collateral cost for a specific position.

const positionPricing = await mmPricing.getPositionPricing({
  ticker: 'ETH-16MAR24-2000-P',
  isLong: false,           // Short position (selling)
  numContracts: 5,
  collateralToken: 'USDC',
});

// Returns: MMPositionPricing
// {
//   ...vanilla pricing fields...,
//   collateralCostPerContract: 11.51,
//   totalCollateralCost: 57.55,
//   netAskPrice: 0.0253 + collateralCostPerUnderlying,
//   ...
// }

Structure Pricing

getSpreadPricing

Fetches pricing for a two-leg spread.

const spreadPricing = await mmPricing.getSpreadPricing({
  underlying: 'ETH',
  strike1: 200000000000,  // 2000 in 8 decimals
  strike2: 250000000000,  // 2500 in 8 decimals
  expiry: 1710547200,
  isCall: true,
});

// Returns: MMSpreadPricing
// {
//   nearLeg: { strike: 2000, ...vanilla pricing... },
//   farLeg: { strike: 2500, ...vanilla pricing... },
//   widthUsd: 500,
//   netSpreadPriceBid: nearBid - farAsk,
//   netSpreadPriceAsk: nearAsk - farBid,
//   spreadCollateralCostUsd: 2.88,
//   netMmBidPrice: netBid - spreadCCPerUnderlying,
//   netMmAskPrice: netAsk + spreadCCPerUnderlying,
// }

getButterflyPricing

Fetches pricing for a three-leg butterfly.

const butterflyPricing = await mmPricing.getButterflyPricing({
  underlying: 'ETH',
  strike1: 190000000000,  // 1900
  strike2: 200000000000,  // 2000
  strike3: 210000000000,  // 2100
  expiry: 1710547200,
  isCall: true,
});

// Returns: MMButterflyPricing
// {
//   lowerLeg: {...},
//   middleLeg: {...},
//   upperLeg: {...},
//   widthUsd: 100,
//   netButterflyPrice: ...,
//   ...
// }

getCondorPricing

Fetches pricing for a four-leg condor.

const condorPricing = await mmPricing.getCondorPricing({
  underlying: 'ETH',
  strike1: 180000000000,  // 1800
  strike2: 190000000000,  // 1900
  strike3: 210000000000,  // 2100
  strike4: 220000000000,  // 2200
  expiry: 1710547200,
  type: 'iron',  // 'call', 'put', or 'iron'
});

// Returns: MMCondorPricing
// {
//   leg1: {...}, leg2: {...}, leg3: {...}, leg4: {...},
//   widthUsd: 100,  // max of spread widths for iron condor
//   netCondorPrice: ...,
//   ...
// }

Helper Functions

parseTicker

Parses an option ticker into components.

import { parseTicker } from '@anthropic/thetanuts-sdk';

const parsed = parseTicker('ETH-16MAR24-2000-P');
// {
//   underlying: 'ETH',
//   expiryLabel: '16MAR24',
//   strike: 2000,
//   isCall: false,
// }

buildTicker

Builds an option ticker from components.

import { buildTicker } from '@anthropic/thetanuts-sdk';

const ticker = buildTicker('ETH', '16MAR24', 2000, false);
// 'ETH-16MAR24-2000-P'

Price Components Summary

When you receive MM pricing, the price includes multiple components:

Component	Description	Applies To
Raw Price	Market maker's base price	All
Fee Adjustment	Exchange fee spread widening	All
Collateral Cost	Cost of capital for short positions	Short only

Final Ask Price (for buying/going long):

finalAsk = rawAsk + feeAdjustment

Final Bid Price (for selling/going short):

finalBid = rawBid - feeAdjustment - collateralCost

Related Documentation

• RFQ Calculations Guide

• Product Types Reference

• RFQ Workflow