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Why Is External Market Price Data Essential for Exercising a Crypto Option Contract?

The contract needs the underlying asset's accurate market price to determine if the option is "in-the-money" and trigger automated exercise.
Greeks.Live05.11.25

Why Is External Market Price Data Essential for Exercising a Crypto Option Contract?

External market price data is essential because an option's value and the decision to exercise are based on the price of the underlying asset relative to the strike price. The smart contract must know the current, accurate market price to determine if the option is in-the-money (ITM).

For example, a call option is exercised only if the current price is above the strike price. This price data, provided by an oracle, triggers the contract's automated settlement logic.

What Is Meant by an Option Being ‘In-the-Money’ (ITM), ‘At-the-Money’ (ATM), or ‘Out-of-the-Money’ (OTM)?
What Is the Concept of “Early Exercise” and Why Is It Usually Avoided?
How Does the Early Exercise Feature Complicate the Pricing of American Options?
Why Is the Early Exercise Feature of American Options Rarely Used in Practice?

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