RUJI Options
RUJI Options is a decentralized options exchange designed to simplify options trading to anyone in the crypto space. RUJI Options offers a straightforward and intuitive user experience, free from convoluted tokenomics or pricing mechanics.
Key Features
Decentralized Orderbook: Options trading is facilitated via a decentralized orderbook that handles bids and asks for multiple strike prices within a given epoch.
Tokenized Options: When a user's order is filled, the protocol generates a unique token representation, known as an "option denom," based on a combination of parameters such as the contract address, underlying asset, option type, strike price, and expiration timeframe.
European-style Options: Options can only be exercised at expiration, providing greater flexibility and allowing investors to better manage their risk exposure without the need for early exercise or intervention.
Strike-Bound Liquidity: An innovative liquidity mechanism ensuring ample liquidity across various strike prices.
Discretized Black-Scholes Pricing: Options are priced using a discretized version of the industry standard Black-Scholes model, providing a transparent and well-understood pricing framework, optimized for liquidity concentration and transparency.
On-chain Historical Volatility: Historical volatility is calculated and stored on-chain, serving as a key input for option pricing.
On-chain Pricing Engine: Deployed fully on-chain for transparency and decentralization.
Strike-Bound Liquidity
The mechanism leverages historical volatility data and confidence intervals to calculate strike prices, which are adjusted based on market conditions and risk tolerance. The calculation process involves the following steps:
Historical Data Capture: Captures periodic pricing data from an on-chain oracle.
Historical Volatility Calculation: Calculates the realized historical volatility over a specified time period.
Confidence Intervals Selection: Selects confidence intervals based on market conditions and risk tolerance, with the standard deviation serving as a proxy for risk.
Strike Price Calculation: Combines historical volatility and confidence intervals to calculate strike prices, using a standard normal distribution to generate a probabilistic range of potential strikes.
This process ensures accurate and responsive strike prices, reflecting actual market conditions.
Benefits
Democratizes Access to Options: Offers a censorship-resistant and transparent alternative to traditional centralized options markets, empowering users with unparalleled control and accessibility.
Fully Decentralized: Enhances transparency (pricing and trading happen 100% on-chain) and reduces counterparty risk while ensuring users retain full custody of their assets throughout the trading process.
Efficiency: Automatic strike prices selection reduces the need for manual orderbook management for liquidity providers, optimizing liquidity concentration and enhancing the trading experience.
Composability: The use of unique "option denoms" standardizes the representation of options positions, enabling seamless integration with other protocols, and fostering the creation of new financial products.
Reselling into the Orderbook: Users can resell their tokenized options back into the orderbook of the RUJI Options market. This innovative capability allows users to easily close their positions or take profits/losses without the need to find a counterparty outside the market, further enhancing the trading experience.
Fees & Fee Sharing with THORChain Base Layer
RUJI Options charges a 1.0% settlement fee on trading volumes.
The standard 50/50 revenue share with TC Base Layer applies to all the fees collected by RUJI Options.
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