For Option Traders
This section provides a comprehensive guide for option traders navigating Stryke’s Concentrated Liquidity Automated Market Maker (CLAMM). It delves into the intricacies of option expiration timeframes, the mechanism of trading options on UniV3 ticks, the extensive variety of strike prices available for calls and puts, and the detailed process of exercising options, including an innovative auto-exercise feature.
Furthermore, it explores the key aspects of volatility and pricing, underpinned by the Black-Scholes model and the integration of implied volatility (IV) into pricing oracles, to ensure traders can make informed decisions in a dynamically evolving market landscape.
Option Expiration Timeframes
Stryke's CLAMM platform facilitates option trading with a variety of expiration timeframes to accommodate diverse trading strategies. These timeframes include:
1 hour
2 hours
6 hours
12 hours
24 hours
7 Days
This flexibility allows traders to execute both short-term and longer-term strategies based on their market analysis and risk appetite.
Trading on UniV3 Ticks
Options within the CLAMM system are traded on UniV3 ticks, providing traders with a precise and granular approach to selecting strike prices for calls and puts. This integration into the concentrated liquidity framework of UniV3 enhances the efficiency of capital utilization and potential profitability of trading strategies.
Strike Selection
Traders can choose from an extensive list of strike prices for both call and put options. This variety ensures traders can tailor their options positions to their market expectations and strategy requirements, enhancing the potential for targeted gains.
Exercising Options
Auto-Exercise Feature
The auto-exercise feature facilitates the automatic execution of in-the-money (ITM) options 5 minutes before their expiration. This feature must be manually enabled by the trader to be active. In order to do so, the trader must enable the auto-exercise feature within the platform UI, after opening the options position.
Manual Exercise
Traders retain the ability to manually exercise their options at any time before expiry, providing control over the timing of their investment decisions.
Note: It's important to enable the auto-exercise feature with the understanding that there is an associated fee (1% of the pnl) for the service.
Fee Overview
Here's a summary of the various fees incured by Options Traders, while using CLAMM:
CLAMM
34% of Premium Charged
Charged at time of option purchase.
CLAMM (Auto Exercise Feature)
1% of PNL
Charged at the time of option exercise. (*If feature is enabled)
Outcomes of Unexercised Options
Options that are not exercised and expire out of the money (OTM) yield no profit, even if they were previously profitable. This highlights the importance of strategic decision-making in the exercise of options.
Volatility & Pricing
The pricing of options on CLAMM leverages the Black-Scholes model, incorporating implied volatility (IV) sourced from market data. Stryke’s automated systems are designed to feed IV into oracles, ensuring that the options pricing reflects up-to-date market conditions and sentiment.
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