What Is “Atomic Settlement” in Options Trading?
Atomic settlement refers to the instantaneous and simultaneous exchange of the option premium and the option contract token, or the underlying asset and the settlement currency upon exercise. This is achieved via a single, indivisible smart contract transaction, eliminating counterparty risk and the time delays found in traditional, multi-step settlement processes.
Glossar
Settlement Currency
Currency ⎊ Within the convergence of cryptocurrency, options trading, and financial derivatives, settlement currency denotes the asset utilized to finalize obligations arising from transactions.
Eliminating Counterparty Risk
Mitigation ⎊ Reducing counterparty risk in cryptocurrency derivatives necessitates a layered approach, extending beyond traditional collateralization.
Simultaneous Exchange
Mechanism ⎊ Simultaneous Exchange, within cryptocurrency and derivatives, denotes the concurrent execution of offsetting transactions, typically across different venues or counterparties, designed to capitalize on fleeting arbitrage opportunities or manage counterparty risk.
Underlying Asset
Foundation ⎊ The concept of an Underlying Asset, within cryptocurrency derivatives and financial markets, establishes the core reference point for valuation and risk transfer.
Option Premium
Cost ⎊ The Option Premium represents the initial cost paid by the buyer to acquire the right conveyed by the contract, functioning as the price for risk transfer.
Atomic Settlement
Execution ⎊ Atomic settlement, within cryptocurrency and derivatives, signifies the conditional transfer of assets ⎊ typically digital ⎊ contingent upon simultaneous fulfillment of pre-defined conditions.