Option Pricing

Warning!

TON Hedge is currently in the alpha testing stage. Content of this section may change in the near future.

Overview

Usually, the option price is around 1-10% of the asset price. The total cost of an option can be calculated more accurately using the formula:

$$O = N * P + T$$

Where:

• O — Total option cost in USDT

• N — Amount of options

• P — Model price, depends on current volatility, option period and strike price

• T — Taker fee

The price model is based on the Binomial option pricing model and is updated every hour or more frequently in case of significant option price changes (more than 0.1%). The model has a mechanism of balancing option prices between types: the type of options that are in greater demand may cost more.

To cover TON price fluctuations during transaction processing, we use a default slippage of 5% and return any excess after the purchase is processed.

TON price is provided by RedStone oracle.

Fees

There is a service fee for each purchased option. It is paid once at the moment of purchasing option, and consists of taker fee, paid by the option buyer, and maker fee, taken from the liquidity pool:

Taker fee	Maker fee
B + 0.0007 * N	0.0008 * N

Where:

• B — Base fee: 0.5 USDT

• N — Asset amount covered by the option. 1 option covers 1 unit of the underlying asset in USDT.

Example:

Andy buys 20 Put Options for TON, and the TON price is 5 USDT.

In this case fees are:

Andy = 0.5 USDT + 0.0007 * 20 * 5 USDT = 0.57 USDT

Pool = 0.0008 * 20 * 5 USDT = 0.08 USDT

Total = 0.57 USDT + 0.08 USDT = 0.65 USDT