The Options DEX
And so, the Chainge derivatives saga continues. But before diving into the exceptional advantages of the Options DEX, let’s see what an option is.
A call option is a binding contract that allows you (as the buyer) to buy an underlying asset at a predetermined price within a set time frame, while a put option is a binding contract that allows you to sell an underlying asset at a predetermined price within a set time frame.
With options, in order to get the right to buy or sell a particular asset at a predetermined price, you have to pay the option seller a price, which is called the option premium.
Besides buying & selling, Chainge will also allow its users to write options. Which is straight out astonishing! We will provide an online form for anyone to apply for the listing of options of a certain token with a requested exercising price. Once the option gets approved by the Chainge community by voting with CHNG (details about the voting process will be disclosed soon) the option will automatically be listed in the Chainge Options DEX.
As long as it is listed, the smart contract developed by Chainge is going to support writing and exercising options in a decentralized way, which means anyone could inject tokens (eg: XYZ) to write the same amount of call options tokens (XYZCO). Once again, thanks to the Time-Frame feature which is integrated in FRC758 protocol, the XYZCO token will be time framed from the present time to the end of this year and when the time arrives, the XYZCO token will just disappear.
But any time before the end of this year, there are 4things that the holder of the XYZCO token could do:
  1. 1.
    He can exercise the call option by injecting back the XYZCO token and the corresponding predetermined exercise price in USDT to receive XYZ token.
  2. 2.
    Keep the token in the Chainge app or send it to someone just like they would send any other token.
  3. 3.
    Sell the call option token XYZCO in the Options DEX market according to the XYZCO/USDT trading pair when he feels price of XYZCO is good enough. 4. Add liquidity to the Options DEX market in the XYZCO/USDT trading pair
  4. 4.
    Add liquidity to the Options DEX market in the XYZCO/USDT trading pair.
A put option works vice versa. Anyone can inject USDT to write corresponding put option tokens (XYZPO). And again, any time before the end of this year, there are 4 things that the holder of the XYZPO token can do:
  1. 1.
    He could exercise the put option by injecting back the XYZPO token and the same amount of XYZ to get back the corresponding USDT according to the predetermined exercising price.
  2. 2.
    Keep the token in the Chainge app or send it to someone just like they would send any other token.
  3. 3.
    Sell the put option token XYZPO in the Options DEX market according to the XYZPO/USDT trading pair when he feels price of XYZCO is good enough.
  4. 4.
    Add liquidity to the option DEX market in the XYZPO/USDT trading pair.

What benefits does the Options DEX bring to retailers?

  1. 1.
    The volatility of a call/put option is higher than its underlying token, BUT they are strongly correlated. So, it would be much more profitable to trade options than to trade underlying tokens if the price moves in an advantageous direction.
  2. 2.
    When margin trading in CEXs, if the price moves in an unfavorable direction, and you don’t meet the margin call, the CEX can close out (force sale/liquidate) any of your open positions. Which means you are done and you will not gain anything back even if the price picks up again. Luckily, with option trading something like this cannot and will not happen because even if the price moves in a disadvantageous direction — as long as it redresses before the end of the exercising deadline (end of this year) — your loss will be covered.
  3. 3.
    Retail traders can buy put options as a type of insurance or protection for their investment. For example, let’s say the current price of XYZ token is 1 USDT, the put option exercising price is 0.5 USDT and the put option premium is 0.01 USDT. If a retail trader is holding 10K XYZ token, with a current total value of 10K USDT, he could use 100 USDT to buy 10K XYZPO in the Chainge Options DEX to prevent the price of the XYZ token from dropping lower than 0.5 USDT. And this way, the put options work as an insurance that guarantees that his loss will not be higher than 5K USDT, because any loss higher than 5K would be covered by the profit brought by holding XYZPO.
  4. 4.
    Furthermore, retailers can also write call options or put options to sell if he feels the option premium is insanely high. Let’s assume the current price of XYZ token is 1 USDT and the call option exercising price is 2 USDT. When the XYZ price moves up to 2.5 USDT, if the call option premium is much much higher than 0.5 USDT (e.g.: 1.5 USDT), the trader could write call options by injecting XYZ in the smart contract and sell it in the Chainge Options DEX. If the option premium drops to a reasonable level, he could buy back to ensure his profit and prevent his XYZ in the option smart contract from being exercised. Or, alternatively, if the XYZ price drops lower than 2 USDT at some point, he doesn’t even need to buy back the XYZCO because no one will exercise the call option. And the same goes for to put options.

What benefits does the Options DEX bring to projects?

  1. 1.
    A project team or a company could write call options to motivate employees and communities to shill their projects.
  2. 2.
    A project team or a company could write call options and sell their token at a higher price.
  3. 3.
    A project team could write put options to show their confidence and trust in the project to the token holders.
  4. 4.
    A project team could write put options to buy back tokens at a lower price.
  5. 5.
    And last but not least, Chainge’s 560.000 users will become their users.