What Is the Main Difference between a 'Cash-Settled' and 'Physical-Settled' Option? ⎊ Path

What Is the Main Difference between a ‘Cash-Settled’ and ‘Physical-Settled’ Option?

In a cash-settled option, when the option is exercised, the difference between the strike price and the current market price is paid in fiat or a stablecoin. No physical delivery of the underlying asset occurs.

In a physical-settled option, the actual underlying asset (e.g. the native token) must be delivered or received upon exercise. DeFi options are often physical-settled for on-chain delivery.

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Glossar

Decentralized Options

Architecture ⎊ Decentralized options represent a paradigm shift in options trading, moving away from centralized exchange reliance towards blockchain-based smart contracts for execution and settlement.