ogdao / optino

Fully collateralised vanilla and bounded (capped call and floored put) crypto options

BokkyPooBah's Vanilla And Bounded Optino(tm) Crypto Options

Status: Work in progress

See the the smart contracts in contracts/OptinoFactory.sol.

See the Optino wiki for documentation (TODO).

The testing is in the test folder, with some sample results in test/test1results.txt.

You can test out a version of the smart contracts using MetaMask connected to the Ropsten network at https://bokkypoobah.github.io/OptinoExplorer.

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Ignore everything below

Risks

• Bugs
  • Smart contracts
  • UI
• Manipulation of the price oracles
• Flash loans
• Chain splits

MakerDAO Price Feed

https://makerdao.com/en/feeds https://etherscan.io/address/0x81FE72B5A8d1A857d176C3E7d5Bd2679A9B85763

How Does This Work

e.g. ETH/DAI

Call Optino

Put Optino

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Vanilla Optino Payoff Formula

Example: ETH/DAI Optinos

• callPut - 0 for call, 1 for put
• strike
• spot
• rateDecimals - strike and spot decimal places

Vanilla Call Optino Payoff Formula

payoffInQuoteToken = max(0, spot - strike)
payoffInBaseToken = payoffInQuoteToken / (spot / 10^rateDecimals)

Vanilla Call Optino Collateral Payoff Formula

payoffInQuoteToken = spot - max(0, spot - strike)
payoffInBaseToken = payoffInQuoteToken / (spot / 10^rateDecimals)

Vanilla Put Optino Payoff Formula

payoffInQuoteToken = max(0, strike - spot)
payoffInBaseToken = payoffInQuoteToken / (spot / 10^rateDecimals)

Vanilla Put Optino Collateral Payoff Formula

payoffInQuoteToken = strike - max(0, strike - spot)
payoffInBaseToken = payoffInQuoteToken / (spot / 10^rateDecimals)

// ---------------------------------------------------------------------------- // Vanilla Optino Formula // // Call optino - 10 units with strike 200, using spot of [150, 200, 250], collateral of 10 ETH // - 10 OptinoToken created // - payoffInQuoteTokenPerUnitBaseToken = max(0, spot-strike) = [0, 0, 50] DAI // - payoffInQuoteToken = 10 * [0, 0, 500] DAI // * payoffInBaseTokenPerUnitBaseToken = payoffInQuoteTokenPerUnitBaseToken / [150, 200, 250] = [0, 0, 50/250] = [0, 0, 0.2] ETH // * payoffInBaseToken = payoffInBaseTokenPerUnitBaseToken * 10 = [0 * 10, 0 * 10, 0.2 * 10] = [0, 0, 2] ETH // - 10 OptinoCollateralToken created // - payoffInQuoteTokenPerUnitBaseToken = spot - max(0, spot-strike) = [150, 200, 200] DAI // - payoffInQuoteToken = 10 * [1500, 2000, 2000] DAI // * payoffInBaseTokenPerUnitBaseToken = payoffInQuoteTokenPerUnitBaseToken / [150, 200, 250] = [1, 1, 200/250] = [1, 1, 0.8] ETH // * payoffInBaseToken = payoffInBaseTokenPerUnitBaseToken * 10 = [1 * 10, 1 * 10, 0.8 * 10] = [10, 10, 8] ETH // // Put optino - 10 units with strike 200, using spot of [150, 200, 250], collateral of 2000 DAI // - 10 OptinoToken created // * payoffInQuoteTokenPerUnitBaseToken = max(0, strike-spot) = [50, 0, 0] DAI // * payoffInQuoteToken = 10 * [500, 0, 0] DAI // - payoffInBaseTokenPerUnitBaseToken = payoffInQuoteTokenPerUnitBaseToken / [150, 200, 250] = [50/150, 0/200, 0/250] = [0.333333333, 0, 0] ETH // - payoffInBaseToken = payoffInBaseTokenPerUnitBaseToken * 10 = [0.333333333 * 10, 0 * 10, 0 * 10] = [3.333333333, 0, 0] ETH // - 10 OptinoCollateralToken created // * payoffInQuoteTokenPerUnitBaseToken = strike - max(0, strike-spot) = [150, 200, 200] DAI // * payoffInQuoteToken = 10 * [1500, 2000, 2000] DAI // - payoffInBaseTokenPerUnitBaseToken = payoffInQuoteTokenPerUnitBaseToken / spot // - payoffInBaseTokenPerUnitBaseToken = [150, 200, 200] / [150, 200, 250] = [1, 1, 200/250] = [1, 1, 0.8] ETH // - payoffInBaseToken = payoffInBaseTokenPerUnitBaseToken * 10 = [1 * 10, 1 * 10, 0.8 * 10] = [10, 10, 8] ETH // // // ---------------------------------------------------------------------------- library VanillaOptinoFormulae { using SafeMath for uint;

// ------------------------------------------------------------------------
// Payoff for baseToken/quoteToken, e.g. ETH/DAI
//   OptionToken:
//     Call
//       payoffInQuoteToken = max(0, spot - strike)
//       payoffInBaseToken = payoffInQuoteToken / (spot / 10^rateDecimals)
//     Put
//       payoffInQuoteToken = max(0, strike - spot)
//       payoffInBaseToken = payoffInQuoteToken / (spot / 10^rateDecimals)
//   OptionCollateralToken:
//     Call
//       payoffInQuoteToken = spot - max(0, spot - strike)
//       payoffInBaseToken = payoffInQuoteToken / (spot / 10^rateDecimals)
//     Put
//       payoffInQuoteToken = strike - max(0, strike - spot)
//       payoffInBaseToken = payoffInQuoteToken / (spot / 10^rateDecimals)
//
// NOTE: strike and spot at rateDecimals decimal places, 18 in this contract
// ------------------------------------------------------------------------
function payoff(uint _callPut, uint _strike, uint _spot, uint _baseTokens, uint _baseDecimals) internal pure returns (uint _payoffInBaseToken, uint _payoffInQuoteToken, uint _collateralPayoffInBaseToken, uint _collateralPayoffInQuoteToken) {
    if (_callPut == 0) {
        _payoffInQuoteToken = (_spot <= _strike) ? 0 : _spot.sub(_strike);
        _collateralPayoffInQuoteToken = _spot.sub(_payoffInQuoteToken);
    } else {
        _payoffInQuoteToken = (_spot >= _strike) ? 0 : _strike.sub(_spot);
        _collateralPayoffInQuoteToken = _strike.sub(_payoffInQuoteToken);
    }
    _payoffInBaseToken = _payoffInQuoteToken * 10 ** 18 / _spot;
    _collateralPayoffInBaseToken = _collateralPayoffInQuoteToken * 10 ** 18 / _spot;

    _payoffInBaseToken = _payoffInBaseToken * _baseTokens / 10 ** _baseDecimals;
    _payoffInQuoteToken = _payoffInQuoteToken * _baseTokens / 10 ** _baseDecimals;
    _collateralPayoffInBaseToken = _collateralPayoffInBaseToken * _baseTokens / 10 ** _baseDecimals;
    _collateralPayoffInQuoteToken = _collateralPayoffInQuoteToken * _baseTokens / 10 ** _baseDecimals;
}
function payoffInDeliveryToken(uint _callPut, uint _strike, uint _spot, uint _baseTokens, uint _baseDecimals) internal pure returns (uint _payoff, uint _collateral) {
    (uint _payoffInBaseToken, uint _payoffInQuoteToken, uint _collateralPayoffInBaseToken, uint _collateralPayoffInQuoteToken) = payoff(_callPut, _strike, _spot, _baseTokens, _baseDecimals);
    if (_callPut == 0) {
        _payoff = _payoffInBaseToken;
        _collateral = _collateralPayoffInBaseToken;
    } else {
        _payoff = _payoffInQuoteToken;
        _collateral = _collateralPayoffInQuoteToken;
    }
}

}

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Exotics

Capped Call

callPayoff = max(spot - strike, 0)
cappedCallPayoff = max(min(spot, cap) - strike, 0)
cappedCallPayoff = max(spot - strike, 0) - max(spot - cap, 0)

Floored Put

putPayoff = max(strike - spot, 0)
flooredPutPayoff = max(strike - max(spot, floor), 0)
flooredPutPayoff = max(strike - spot, 0) - max(floor - spot, 0)

Enjoy!

(c) BokkyPooBah / Bok Consulting Pty Ltd - Jan 26 2020. The MIT Licence.