Put

Put option is an on-chain contract that gives a buyer the right, but not the obligation, to sell ETH or BTC at a fixed price during a certain period.

How Put Options Work?

Put option contract buyer chooses the size, period and strike price for an option contract. A size refers to a number of options contracts that buyer is acquiring. A period is the number of days that the option contract will be active for. The pre-determined price the put option buyer can sell at is called the strike price.

Premium will be calculated for the chosen size, period and strike price for a put option contract. After that, the buyer will be asked to pay this amount in USDC using their wallet. After payment, buyer will receive NFT option token that represents his bought option.

After blockchain confirms the transaction, the buyer will be able to exercise the put option contract during the selected period using the aforementioned NFT option token.

Put Option is a bearish financial instrument. Buyer is bearish on the price of the asset during the period of the option.

How to Exercise a Put Option?

For exercising an put option contract, the buyer sends the NFT option token to the protocol and automatically receives amount of USDC corresponding to profit of his option.

A put option contract buyer is only able to exercise the contract before the expiration time that the contract has been activated for, with a precondition that the price is above the strike price.

All options on Hegic are cash-settled, which means the profits are distributed in USDC.

What Periods Are Available?

Put options contracts can be activated from minimum 7 to 90 days longest.

What Strike Prices Are Available?

Buyers can choose out of 4 different strike prices for their ETH or BTC put options contracts on Hegic.

Those are: ATM price (current price of ETH or wBTC on the market), and three OTM Prices:

• Market Price - 10% (+rounding) = OTM Put Strike #1

• Market Price - 20% (+rounding) = OTM Put Strike #2

• Market Price - 30% (+rounding) = OTM Put Strike #3

Example: Let’s say the market price of ETH is $2,337.

The OTM strikes that will be available for trading are:

For put options: $2,337 * 0.9 = $2,103 +rounding => $2,100 Strike #1x $2,337 * 0.8 = $1,869 +rounding => $1,900 Strike #2 $2,337 * 0.7 = $1,636 +rounding => $1,600 Strike #3

Whenever the price of ETH or WBTC changes, the corresponding OTM strikes will follow the market price. The OTM Prices are about offering a range of -30% — +30% out-of-the-money strikes at any given time.

The OTM options can only be exercised if the strike price is reached.