Vault Bidder (Option Buyer)
Options Buyers purchase options to meet their speculative or hedging needs.
- Speculators
High volatility is one of the key characteristics of long-tail assets. If speculators long or short on such assets by holding perpetual futures, they are highly likely to be liquidated, even with 5x leverage. However, if they use options to long or short on these assets, they will be exempt from liquidation risk. By buying out-of-the-money options, they can leverage their positions up tp 1,000x.
- Hedgers
Options allow traders to hedge non-linear risks. Typus will integrate AMM Swap and lending protocols to meet the long-term and stable demand for options.
A Covered Call vault bidder is a covered call buyer. The buyer needs to bid the option when the vault is auctioned and pay premium (depositor's reward) either in underlying tokens (such as $SUI) or stablecoins (such as $USDC) after an auction ends.
If the buyer decides to execute the contract as the call option expires, the underlying asset deposited by the seller will be transferred to the buyer, that is, cash-settled in tokens.
Example
You pay 0.0625 SUI to buy 1 SUI call option.
- Duration: 7 days
- Current market price: 1 SUI = 10 USDC
- Strike price: 1 SUI = 15 USDC
- Contract Size: 1 SUI Call Option
- Premium: The seller gets 0.0625 SUI from you before vault settlement
Case 1: When Settle Price > Strike Price, you may gain
If the price of SUI rises strongly to 20 USDC when the call expires, you have the right to execute the call. At this time, you get 0.25 SUI token from the seller. The amount is equal to the difference between the market price and the strike price at expiry.ย
- Market price at expiry: 1 SUI = 20 USDC
- Strike price: 1 SUI = 15 USDC -> executed by you
- Vault Settlement: You get [ (20 - 15) / 20 ] =ย 0.25 SUI from the seller
- Net PNL in SUI:
- You get 0.1875 SUI ( 0.25 SU - 0.0625 SUI = 0.1875 SUI )
- The seller loses 0.1875 SUI
If the price of SUI rises slightly to 16 USDC when the call expires, you have the right to execute the call. At this time, you get 0.0625 SUI token from the seller. The amount is equal to the difference between the market price and the strike price at expiry.ย
- Market price at expiry: 1 SUI = 16 USDC
- Strike price: 1 SUI = 15 USDC -> executed by you
- Vault Settlement: You get [ (16 - 15) / 16 ] =ย 0.0625 SUI from the seller
- Net PNL in SUI:
- You are breakeven ( 0.0625 SUI - 0.0625 SUI = 0 SUI )
- The seller is breakeven too
Case 2: When Settle Price โฆ Strike Price, you lose
If the price of SUI stays below 15 USDC when the call expires, you will not execute the call.
- Market price at expiry: 1 SUI โฆ 15 USDC
- Strike price: 1 SUI = 15 USDC -> not executed by you
- Vault Settlement: The seller doesnโt need to transfer SUI to you
- Net PNL in SUI:
- You lose 0.0625 SUI
- The seller gets 0.0625 SUI
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A Call Selling vault bidder is a call buyer. The buyer needs to bid the option when the vault is auctioned and pay premium (depositor's reward) in stablecoins (such as $USDC) after an auction ends.
If the buyer decides to execute the contract as the call option expires, the stablecoins deposited by the seller will be transferred to the buyer, that is, cash-settledย in stablecoins.
Example
You pay 1 USDC to buy 1 SUI call option.
- Duration: 7 days
- Current market price: 1 SUI = 10 USDC
- Strike price: 1 SUI = 12 USDC
- Contract Size: 1 SUI Call Option
- Premium: The seller gets 1 USDC from you before vault settlement
Case 1: When Settle Price > Strike Price, you may gain
If the price of SUI rises strongly to 15 USDC when the call expires, you have the right to execute the call. At this time, you get 3 USDC from the seller. The amount is equal to the difference between the market price and the strike price at expiry.ย
- Market price at expiry: 1 SUI = 15 USDC
- Strike price: 1 SUI = 12 USDC -> executed by you
- Vault Settlement: You get 15 - 12 = 3 USDC from the seller
- Net PNL in USDC:
- You get 2 USDC ( 3 USDC - 1 USDC = 2 USDC )
- The seller loses 2 USDC
If the price of SUI rises slightly to 13 USDC when the call expires, you have the right to execute the call. At this time, you get 1 USDC from the seller. The amount is equal to the difference between the market price and the strike price at expiry.ย
- Market price at expiry: 1 SUI = 13 USDC
- Strike price: 1 SUI = 12 USDC -> executed by you
- Vault Settlement: You get 13 - 12 =ย 1 USDC from the seller
- Net PNL in SUI:
- You are breakeven ( 1 USDC - 1 USDC = 0 USDC )
- The seller is breakeven too
Case 2: When Settle Price โฆ Strike Price, you lose
If the price of SUI stays below 12 USDC when the call expires, you will not execute the call.
- Market price at expiry: 1 SUI โฆ 12 USDC
- Strike price: 1 SUI = 12 USDC -> not executed by you
- Vault Settlement: The seller doesnโt need to transfer SUI to you
- Net PNL in SUI:
- You lose 1 USDC
- The seller gets 1 USDC
๐๐ป Start Earning: Bid๏ปฟ
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A Put Selling vault bidder is a put buyer. The buyer needs to bid the option when the vault is auctioned and pay premium (depositor's reward) either in underlying tokens (such as $SUI) or stablecoins (such as $USDC) after an auction ends.
If the buyer decides to execute the contract as the put option expires, the stablecoins deposited by the seller will be transferred to the buyer, that is, cash-settledย in stablecoins.
Exampleย
You pay 1 USDC to buy 1 SUI put option.
- Duration: 7 days
- Current market price: 1 SUI = 10 USDC
- Strike price: 1 SUI = 8 USDC
- Contract Size: 1 SUI Put Option
- Premium: The seller gets 1 USDC from you before vault settlement
Case 1: When Settle Price < Strike Price, you may gain
If the price of SUI decreases strongly to 5 USDC when the put expires, you have the right to execute the put. At this time, you get 3 USDC from the seller. The amount is equal to the difference between the market price and the strike price at expiry.ย
- Market price at expiry: 1 SUI = 5 USDC
- Strike price: 1 SUI = 8 USDC -> executed by you
- Vault Settlement: You get ( 8 - 5 ) = 3 USDC from the seller
- Net PNL in USDC:
- You get 2 USDC ( $3 - $1 = $2 )
- The seller loses 2 USDC
If the price of SUI decreases slightly to 7 USDC when the put expires, you have the right to execute the put. At this time, you get 1 USDC from the seller. The amount is equal to the difference between the market price and the strike price at expiry.ย
- Market price at expiry: 1 SUI = 7 USDC
- Strike price: 1 SUI = 8 USDC -> executed by you
- Vault Settlement: You get ( 8 - 7 ) = 1 USDC from the seller
- Net PNL in USDC:
- You are breakeven ( $1 - $1 = $0 )
- The buyer is breakeven too
Case 2: When Settle Price โง Strike Price, you lose
If the price of SUI stays above 8 USDC when the put expires, you will not execute the put.
- Market price at expiry: 1 SUI โง 8 USDC
- Strike price: 1 SUI = 8 USDC -> not executed by you
- Vault Settlement: The seller doesnโt need to transfer USDC to you
- Net PNL in USDC:
- You loses 1 USDC
- The seller gets 1 USDC
Please note that stablecoins could be replaced by native tokens such as $SUI as well.
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A Covered Spread vault bidder is a call spread buyer. The buyer needs to bid the option when the vault is auctioned and pay premium (depositor's reward) either in underlying tokens (such as $SUI) or stablecoins (such as $USDC) after an auction ends.
If call buyers decide to execute the contract as the call expires, the underlying asset deposited by the seller will be transferred to the buyer, that is, cash-settled in tokens.
Example
You pay 0.07 SUI to buy 1 SUI call spread option.
- Duration: 7 days
- Current market price: 1 SUI = 10 USDC
- Strike price A: 1 SUI = 13 USDC
- Strike price B: 1 SUI = 15 USDC
- Contract Size: 1 SUI Call Spread Option
- Premium: The seller gets 0.07 SUI from you before vault settlement
Case 1: When Settle Price โง Strike price B, you gain
If the price of SUI rises strongly to 20 USDC when the call spread expires, you have the right to execute the call at Strike price A, and the seller has the right to execute the call at Strike price B. At this time, you get 0.10 SUI token from the seller. The amount is equal to the difference between the market price and the strike price at expiry.ย
- Market price at expiry: 1 SUI = 20 USDC
- Strike price A: 1 SUI = 13 USDC -> executed by you
- Strike price B: 1 SUI = 15 USDC -> executed by the seller
- Vault Settlement: You get [ (20 - 13) / 20 ] - [ (20 - 15) / 20 ] =ย 0.35 - 0.25 = 0.10 SUI from the seller
- Net PNL in SUI:
- You get 0.03 SUI ( 0.10 SUI - 0.07 SUI = 0.03 SUI )
- The seller loses 0.03 SUI
Case 2: When Strike price A < Settle Price < Strike price B, you may lose
If the price of SUI rises slightly to 14 USDC when the call spread expires, you have the right to execute the call at Strike price A. At this time, the buyer gets 0.07 SUI token from you. The amount is equal to the difference between the market price and the strike price at expiry.ย
- Market price at expiry: 1 SUI = 14 USDC
- Strike price A: 1 SUI = 13 USDC -> executed by yoy
- Strike price B: 1 SUI = 15 USDC -> not executed by the seller
- Vault Settlement: You get [ (14 - 13) / 14 ] =ย 0.07 SUI from the seller
- Net PNL in SUI:
- You are breakeven ( 0.07 SUI - 0.07 SUI = 0 SUI )
- The seller is breakeven too
Case 3: When Settle Price โฆ Strike Price A, you lose
If the price of SUI stays below 13 USDC when the call spread expires, you will not execute the call at Strike price A.
- Market price at expiry: 1 SUI โฆ 13 USDC
- Strike price A: 1 SUI = 13 USDC -> not executed by you
- Strike price B: 1 SUI = 15 USDC -> not executed by the seller
- Vault Settlement: The seller doesnโt need to transfer SUI to you
- Net PNL in SUI:
- You lose 0.07 SUI
- The seller gets 0.07 SUI
๐๐ป Start Earning: Bid๏ปฟ
๐ Vault Analysis: Check Historial Performance๏ปฟ
๐ Read More: Bidder Guide๏ปฟ
