What Is the Impact of a Stablecoin De-Peg on a Cash-Settled Option’s Final Value?

For a cash-settled option, the final value is calculated as the difference between the strike price and the underlying asset's price, paid in the settlement currency (the stablecoin). If the stablecoin de-pegs below $1, the real-world value of the final settlement payment is diminished, reducing the actual profit for the option holder.

This introduces counterparty and settlement risk into the options market.