How Do Decentralized Options Platforms Use Oracles to Calculate Option Strike Prices?
Decentralized options platforms typically do not use oracles to calculate the strike price itself, as the strike price is a fixed term set when the contract is created. Instead, oracles are used to provide the reliable spot price of the underlying asset at the time of expiration.
This price is compared to the fixed strike price to determine if the option is in-the-money (ITM) and what the final settlement value should be, triggering the automatic execution.
Glossar
Final Settlement Value
Settlement ⎊ Within cryptocurrency derivatives and options trading, the Final Settlement Value represents the conclusive monetary outcome determined after all contractual obligations are fulfilled, reflecting the net position of a participant.
Decentralized Options Platforms
Architecture ⎊ Decentralized Options Platforms (DOPs) leverage blockchain technology, primarily smart contracts, to facilitate options trading without traditional intermediaries.
Options Platforms
Architecture ⎊ Options platforms, within the cryptocurrency derivatives landscape, represent the technological infrastructure enabling the creation, listing, and trading of options contracts referencing digital assets.
Strike Price
Reference ⎊ The Strike Price is the predetermined reference level set at the contract's inception against which the underlying crypto asset's spot price is compared at expiration or exercise.