How Can Smart Contracts Handle the Exercise and Assignment of Options in a Decentralized Manner?

Smart contracts can automate the exercise and assignment of options in a decentralized way by codifying the logic of the process. When an option holder decides to exercise their right, they can trigger a function in the smart contract.

The contract then verifies the conditions for exercise, such as the expiration date and price. Upon successful verification, the contract automatically facilitates the transfer of the underlying asset from the seller to the buyer and the corresponding payment, all without the need for a central clearinghouse.