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Selling an Option
Sell your option to take profits without exercising your Option.
Wasabi Options are ERC-721 tokens meaning that they are easily tradable. You can list, transfer and sell these tokens to other market participants on any marketplace. As the options markets evolve and increase in volume, people start trading the option positions to take in profits instead of just exercising them. This creates a secondary market of the derivates, helps bring in more liquidity to the general market, and allows traders to settle their positions & take profits more quickly.
Assume this scenario:
- 1.Current BAYC floor price is 60 ETH
- 2.Someone purchases a Call option for a Strike price of 70 ETH and a 30 days expiration from now. (They will be able to buy a BAYC for 70 ETH within the next month regardless of the floor price). They paid 1 ETH premium for this Call option.
- 3.5 days after this option was purchased, Yuga Labs announces positive news and the floor price of BAYC shoots up to 68 ETH. Now if someone else, wants to buy the same option (70 ETH strike with an expiration in 30-5=25 days), they will have to pay 1.8 ETH premium. This increase is because the floor price is now very close to the strike price (only a 2 ETH difference) even though there is less time remaining on the option.
- 4.The person who bought the call option for 1 ETH now holds an option that's worth 1.8 ETH. They can sell it to someone else and take in the easy profits.
We are building a trading exchange for Wasabi Options on our website, however, during the trading competition, traders won't be able to sell the options to one another through our website. However, in order to imitate this real-world situation, we created an automated FMV (Fair Market Value) option market maker. Traders will be able to sell their option NFTs to this AMM for the calculated fair market value of the option.
Last modified 8mo ago