In an Options Contract, What State Changes Occur upon Exercise?
When an options contract is exercised, several state changes occur. The contract's internal state is updated to mark the option as exercised, preventing further exercise.
The collateral or underlying asset is transferred from the seller to the buyer, and the premium is transferred if it was not paid upfront. Finally, the balances of the buyer and seller are updated to reflect the asset transfer.
Glossar
State Changes
Transition ⎊ State changes within cryptocurrency, options, and derivatives represent shifts in the underlying conditions governing contract valuation and risk profiles.
Options Contract
Mechanism ⎊ An options contract within cryptocurrency markets represents a financial derivative granting the holder the right, but not the obligation, to buy or sell an underlying crypto asset at a predetermined price ⎊ the strike price ⎊ on or before a specified date, the expiration date.
State Change
Transition ⎊ The atomic update of the distributed ledger's state, triggered by the successful validation of a new block, which incorporates all new transactions and modifies account balances or contract storage.