dmshvetsov / otp

(Open) Option Trading Protocol on Aptos network written with Move programming language

(Open) Option Trading Protocol - OTP

Roadmap

MVP

• underwrite a CALL option with collateral
• ability to buy a share
• option settlement at expiry (european options)
• scheduled worker to settle options
• testnet launch

Future

• underwrite a PUT option with collateral
• scheduled/automatic settlement

option symbol convention

Based on Options Clearing Corporation (OCC) Option Symbology Initiative (OSI) but taking into account the proposed format limits:

• OSI quote currency is implicitly USD, in cryptocurrency space we need to be open for the future where USDC, USDT, BTC can be quote currencies
• OSI max quote values for the option asset is 99999 in quote currency, that means BTC above 100k is not supported
• OSI year format is expressed with 2 numbers, which make it impossible to express options of year 2100 and beyond
• OSI base asset cannot be expressed with numbers

Proposed symbology

<TICKER, all uppercase>-YYYYMMDD-<C|P>-<#K###|###U####>

examples:

• BTC_USD-20220811-C-26K1000
• BTC_USD-20220811-P-25K3500
• BTC_USDC-20220811-P-25K3500
• BTC_RNBC-20220811-P-184K8000
• APT_USD-20220811-C-6U0000
• APT_USD-20220811-P-4U9000

For more info about OSI, search for "OPTIONS SYMBOLOGY INITIATIVE IMPLEMENTATION" by OCC at feb 3, 2010.

unix timestamp to date conversion algo

• https://stackoverflow.com/a/32158604/6317812
• http://git.musl-libc.org/cgit/musl/tree/src/time/__secs_to_tm.c?h=v0.9.15
• https://opensource.apple.com/source/ntp/ntp-13/ntp/libntp/mktime.c

Similar protocols

• https://github.com/gmondok/ChainlinkCallOptions/blob/main/chainlinkOptions.sol

useful move libraries

• https://github.com/pentagonxyz/movemate

Relevant links

• list of Aptos coins https://aptoscan.com/coins

Glossary

VAA - Verifiable Action Approval, a proof that the message has been signed by the majority of the guardians (validators) of wormhole

DOV – DeFi options vault

Liquidity - efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price

Liquidity (in crypto) - the ease or rapidity with which one can buy or sell a digital asset close to its market price

Option Intrinsic Value – the difference between the option's strike or exercise price and the current market price of the underlying asset.

Option Time Value – represents the extra premium that traders and investors are willing to pay for the option based on its potential to make a profit before the option expires. Time value is influenced by factors such as the time remaining until expiration, the volatility of the underlying asset, interest rates, and dividends if applicable. Time value accounts for the risk or uncertainty associated with holding the option over time.

EMA Price (Feed) – exponentially-weighted moving average of the price. These values are time-weighted averages of the aggregate price and confidence. More details https://pythnetwork.medium.com/whats-in-a-name-302a03e6c3e1

Optimization ideas

• do not mint option fungible token unit there is a buyer
• convert timestamp in the option name to date in format 08SEP2023
• maybe it is better to use u128 for supply_amount for option tokens on creation
• freeze collaterized asset on the option issuer account instead of transfer it to resource account address
• extract option object and related fun to separate module european option
• take into account Pyth price confidence and/or price EMA
• round strike and premium to USD cents