How Are Smart Contracts Used in Decentralized Options Trading?

Smart contracts automate the execution and settlement of options trades without intermediaries. They are used to define the option's terms (strike price, expiry, collateral), lock up the collateral (e.g. cryptocurrency), and automatically execute the payoff or settlement based on external price data (oracles) at expiry.

The code replaces the need for a clearing house, ensuring trustless and transparent execution of the derivative contract.