What Is the Difference between an American and a European Option in the Context of Oracle Use?
The difference lies in when the oracle price is needed. A European option can only be exercised at its expiration date, so the oracle is only required to provide the final, definitive settlement price at that single moment.
An American option can be exercised at any time up to and including the expiration date. While the oracle still provides the final settlement price, the protocol must also constantly monitor the oracle feed for real-time pricing to allow for early exercise.
Glossar
Definitive Settlement Price
Valuation Anchor ⎊ Definitive Settlement Price is the single, immutable price point sourced from a decentralized oracle network at a precise moment, used by smart contracts to calculate the final obligations for options or futures contracts at expiration.
Oracle Data
Source ⎊ Oracle Data represents external, real-world information, such as asset prices, interest rates, or market volatility indices, that is securely and reliably fed into a blockchain's smart contracts.
Oracle Feed
Function ⎊ An oracle feed serves as the external data source that provides real-world information to smart contracts, enabling them to execute derivatives contracts based on current market conditions.
Decentralized Options Protocols
Protocol ⎊ Decentralized Options Protocols represent a paradigm shift in derivatives trading, leveraging blockchain technology to disintermediate traditional exchanges and clearinghouses.
Continuous Price Monitoring
Surveillance ⎊ Continuous price monitoring within cryptocurrency, options trading, and financial derivatives represents a systematic observation of market data streams to detect arbitrage opportunities, assess relative value discrepancies, and manage associated risks.
American Options
Exercise Timing ⎊ American Options grant the holder the right, but not the obligation, to execute the option at any point up to and including the expiration date, offering maximum flexibility in managing exposure to underlying asset price movements in crypto derivatives markets.