How Does a Price Feed Error Impact an Options Contract’s Automatic Exercise?

Many decentralized options contracts use an automated process to exercise options that are 'in-the-money' at expiration. If the oracle provides an erroneous price feed at the moment of expiration, an option that should have been profitable might be incorrectly deemed 'out-of-the-money' and allowed to expire worthless, or vice versa.

This error directly leads to an unfair and incorrect settlement for the option holder.