Why Is the Time-Weighted Average Price (TWAP) Often Preferred over a Spot Price for Options Oracles?

The Time-Weighted Average Price (TWAP) is preferred because it calculates the average price of an asset over a specific period, rather than using a single, instantaneous spot price. This smoothing technique makes the price feed highly resistant to momentary price spikes or flash loan manipulation attempts.

For options, which are longer-term contracts, a TWAP provides a more stable and representative valuation for fair settlement and liquidation.