At the end of the option period, the protocol determines the fair market value of the underlying asset by auctioning it. This auction starts at a configurable period of time prior to the expiration of the option. The default value is 24 hours.
To bid, bidders may call the
bid(uint256 optionId) method on the relevant call instrument.
If the option writer is bidding on their own asset (i.e., if they're bidding in the settlement auction for an option they created), they may place bids at a discounted rate because otherwise, at the end of the auction, they'd receive the strike price anyway. The amount payable they send with the bid is added to the strike price to determine the value of their bid.
Each successive bid must increase by the minimum bid increment, which is also configurable and emits when changed for off-chain monitoring.
If a bid exceeds the strike price, the option will be sold unless the writer reclaims the asset. Otherwise, the auction fails, and someone may call
burnExpiredOption(uint256 optionId) to cleanup the option NFT.
Updated over 1 year ago