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Right now, each put entitles the user to BUY 1 DAI per option for 1/strikePrice of underlying tokens, effectively selling the 1/strikePrice of underlying for 1 DAI.
This means, to have a full +1 ETH $1000 Put, you need 1000 put option tokens. This can get a little confusing, since options dont have a multiplier like this.
This can be updated by making the SHORT OPTION TOKEN (Redeem.sol), redeemable for underlying tokens at a ratio of 1:1, and redeemable for strike tokens at a ratio of 1/strikePrice. Currently, short option tokens are redeemable for underlying tokens at a ratio of 1:1/strikePrice, and 1:1 with strike tokens.
This would also reduce some math that is done by the functions to check how many short option tokens to mint, and compare the proportions with the long option token balance.
Originally, the short option token was made 1:1 with the strike token because there was a chance to make them fungible with eachother. For example, if all short option tokens for call options are redeemable for 1 dai, then they are fungible. BUT, they are redeemable for different amounts of underlying tokens (if the options are expired and not in the money), which prevents them from being completely fungible.
The text was updated successfully, but these errors were encountered:
Right now, each put entitles the user to BUY 1 DAI per option for 1/strikePrice of underlying tokens, effectively selling the 1/strikePrice of underlying for 1 DAI.
This means, to have a full +1 ETH $1000 Put, you need 1000 put option tokens. This can get a little confusing, since options dont have a multiplier like this.
This can be updated by making the SHORT OPTION TOKEN (Redeem.sol), redeemable for underlying tokens at a ratio of 1:1, and redeemable for strike tokens at a ratio of 1/strikePrice. Currently, short option tokens are redeemable for underlying tokens at a ratio of 1:1/strikePrice, and 1:1 with strike tokens.
This would also reduce some math that is done by the functions to check how many short option tokens to mint, and compare the proportions with the long option token balance.
Originally, the short option token was made 1:1 with the strike token because there was a chance to make them fungible with eachother. For example, if all short option tokens for call options are redeemable for 1 dai, then they are fungible. BUT, they are redeemable for different amounts of underlying tokens (if the options are expired and not in the money), which prevents them from being completely fungible.
The text was updated successfully, but these errors were encountered: