What Is the Concept of “In-the-Money” for a Tokenized Call Option?
A tokenized call option is "in-the-money" when the current market price of the underlying token is higher than the option's strike price. This means the option holder can exercise the contract to buy the underlying asset at a price lower than the market value, resulting in a positive intrinsic value.
The smart contract uses the oracle price to determine this status.
Glossar
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.
Tokenized Call Option
Structure ⎊ A tokenized call option represents a derivative contract, digitally recorded on a blockchain, granting the buyer the right ⎊ but not the obligation ⎊ to purchase a specified cryptocurrency asset at a predetermined price, known as the strike price, on or before a specified expiration date.
Market Price
Valuation ⎊ Current rate at which a digital asset is being traded on an exchange reflects the collective sentiment of all participants.
Intrinsic Value
Valuation ⎊ This represents the in-the-money amount of an option, calculated as the difference between the spot price and the strike price, if positive, otherwise zero.
Smart Contract
Code ⎊ The contract is fundamentally self-executing code deployed on a distributed ledger, embodying the terms of the agreement in an immutable format.
Underlying Token
Valuation ⎊ The underlying token, within cryptocurrency derivatives, represents the reference asset upon which the derivative contract’s value is based, functioning as the foundational element for price discovery and risk assessment.