What Is the Role of Oracles in Providing External Data to Smart Contracts for Options Trading?

Smart contracts cannot access external, off-chain data on their own. Oracles act as a bridge, securely feeding real-world information, such as asset prices or market volatility, to the smart contract.

For options trading, an oracle would provide the underlying asset's price at the expiration date. The smart contract then uses this data to automatically determine if the option is in-the-money and execute the settlement accordingly.

The reliability and security of the oracle are critical to the integrity of the smart contract's execution.