How Do Decentralized Finance (DeFi) Options Protocols Handle the Early Exercise Feature? ▴ Learn

How Do Decentralized Finance (DeFi) Options Protocols Handle the Early Exercise Feature?

DeFi options protocols typically use a European-style structure to simplify the smart contract logic and reduce gas costs associated with complex American-style calculations. However, some protocols are exploring American-style options by using mechanisms like collateralized debt positions (CDPs) or specific on-chain pricing oracles, though this adds complexity and higher transaction costs.

Under What Circumstances Would an Early Exercise of an American Option Be Beneficial?

Why Is the Early Exercise Feature of American Options Rarely Used in Practice?

How Does Early Exercise Affect the Pricing of American Options?

Why Is Early Exercise Generally Not Optimal for American Call Options?