How Can an Option Contract Be Structured and Executed Using a Smart Contract?

The smart contract code defines the option's parameters: the underlying asset, strike price, expiration date, and premium. The contract is deployed with the premium locked by the buyer.

Upon the expiration date, an Oracle feeds the current market price of the underlying asset to the contract. The smart contract automatically compares the market price to the strike price and executes the "in-the-money" action, transferring the underlying asset or cash to the option holder, or expires worthless.