Trading Options

Warning!

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

Overview

Options allow you to lock in an asset price for a fixed period, enabling you to earn profit from the price difference when you exercise the option.

With TON Hedge, you can buy cash-settled options for TON on-chain. Thus you can hedge your risks, or earn profit on sharp price movements. The straightforward interface is designed for both beginners and experienced traders.

Currently, only TON is supported as an underlying asset, but other assets like BTC and ETH will be added in near future. TON price is provided by RedStone and validated on-chain at the time of purchase.

There are two types of options available at the moment — Put and Call.

Put Options

A Put Option gives you the right to sell TON at the strike price, enabling you to earn profit in USDT from the price difference when you exercise the option. If you're bearish about TON, buying a Put Option protects your savings from a sudden price drop for a specified period of time.

Example

• You have 1 TON, and 3 days ago you bought a weekly Put Option for TON with a strike price of $8, and it cost you $0.5

• Suddenly market fell dramatically, and the current TON price is $4

• You can exercise option and receive $4 profit, which is x8 return, that almost covers your losses on this TON price drop

• You still can exercise later on lower price before the week expires

Call Options

Buying a Call Option allows you to lock in the current TON price for a fixed period of time, securing a lower price for the future if the market price rises sharply.

Example

• 3 days ago you bought a weekly call option for TON with a strike price of $8, and the current TON price is $10

• Option cost you $0.5

• You can exercise option immediately and receive $2 profit, which is x4 return

• You still can wait for a better price before the week expires

Buying Option

To buy an option on TON Hedge, you need to choose:

• Option type — Call or Put

• Amount of options — 1 option covers 1 TON

• Expiration date — from 1 day to 1 month. You can exercise option at any time during the period before expiration.
• Strike price — The predetermined price at which the option can be exercised. You can only exercise Call options, when the current asset price is above the strike price, or is below the strike price for Put options. By default it is ATM (at-the-money, which means the current market price of the underlying asset at the moment of signing transaction for purchasing an option). It is also possible to set further strike prices to bet on higher volatility.

Note: it is not available to buy an option, if it expires in less than 1 hour

The option cost is paid once at the moment of purchase. It consists of the premium, which goes entirely to the liquidity pool, and the taker fee. The premium amount depends on the expiration date, strike price and volatility, typically equaling 1-10% of the underlying asset price. You can read details about option pricing here.

Once an option is purchased, the covered amount and premium are locked in the liquidity pool until the option is exercised or expires.

Exercising Option

The profit from exercising the option is paid in USDT directly to the options holder wallet, immediately after it is exercised.

PnL from exercising a Call option can be calculated using the formula:

$$PnL = N * (M - S) - O$$

Or using this formula for Put options:

$$PnL = N * (S - M) - O$$

Where:

• N — Amount of options

• M — Market price of the underlying asset at the moment of signing transaction.

• S — Strike price

• O — Option price

Option can be exercised at any time before the expiration date, if these conditions are met:

• For Put Options, underlying asset market price must be below the strike price
• For Call Options, underlying asset market price must be above the strike price

Options expire at 08:00 UTC on their expiration date. If an option is not exercised before this time, it will be automatically exercised after expiration, using the asset price at 08:00 UTC and rewarding the option holder in case of profit. There is no guarantee of exercising exactly at 08:00 UTC; there may be potential delays.

Transferring options

Since options are implementing NFT standard, users can transfer them to another wallet. This allows to manage positions across different accounts or trade options with others.