Call Option: A type of derivative that grants the holder the right but not the obligation to purchase the underlying asset at a specified price at a specified time in the future.
Hook's call options grant the holder to all proceeds above the strike price from the sale of the underlying NFT.
Put Option: A type of derivative that grants the holder the right but not the obligation to sell the underlying asset at a specified price at a specified time in the future. Hook does not support put options at the moment.
Strike Price: The minimum price of an option for it to be in the money.
Expiration Date: The date when the option can be exercised.
Premium: The price of an option.
Breakeven Price: The price at which the option holder breaks even. Slightly different than strike price = spot price as gas costs must be accounted for.
American Options: A type of option that can be exercised on or before its expiration date.
European Options: A type of option that only can be exercised on its expiration date.
Hook uses European Options. Holders can sell them on Hook's secondary market to exit their position.
Bid: An option offer. The highest will be surfaced in Hook's UI.
Ask: An option listing. The lowest will be surfaced in Hook's UI.
Market Order: An order type allowing a trader to purchase an option immediately.
Limit Order: An order type allowing a trader to purchase an option at a specific price. The order will not be filled immediately.
In the Money: The option is currently profitable because the underlying asset's spot price is higher than the strike price.
At the Money: The option is net zero because the underlying asset's spot price is equal to the strike price.
Out of the Money: The option is unprofitable because the underlying asset's spot price is lower than the strike price.
Implied Volatility (IV) : A forward-looking metric that predicts the future volatility of an option. Options with higher implied volatilities are more likely to expire in the money, meaning they will have higher premiums.
Delta: Delta is a metric measuring the price sensitivity of a derivative to a $1 change in its underlying asset. For example, if the price of an apple increases by $1, but the price of an apple derivative only increases by $0.50, then the delta of the apple derivative is 0.50. For options, delta values are positive for calls (between 0 and 1) and negative for puts (between -1 and 0). The value of a delta in percentage terms gives an approximate probability that the option will finish in the money.
Updated 4 months ago