vBids are a new bid type that act as the floor for all options in a collection. A single vBid is valid across all options in a collection regardless of strike price and expiration date.

vBid Basics

Options across a collection have varying prices because of differences in their terms like strike price and expiration date. However, across a collection, a measure called implied volatility all of tends to be similar across all options.

Although options with different strikes and expirations can have different prices, they often have similar implied volatilities.

The implied volatility is consistent across these four options.

Because of this, traders can compute the premiums for all options in a collection by selecting a specific volatility and then computing the price with each options strike and expiration.

Hook’s vBids simplify this process for traders. A trader can select a volatility and vBids will automatically compute a wETH price for every option in a collection based on real-time market conditions.

The Benefits of vBids

  1. Reduces the need to constantly update bids
    An option’s value depends on many parameters, including its’ time to expiry and strike price. When one of these parameters changes, so will the expected premium. Without vBids, traders need to constantly update their bids or use Hook's RFQ to automatically place them. This is overly complicated for the majority of users.
  2. Bid on multiple options at a time
    Different options in the same collection may have very different strike prices and expirations. As a result, when bidding in wETH, you need to offer a very different premium for each. vBids allow users to input a single implied volatility and the protocol automatically places wETH bids for each individual strike price and expiration.
  3. Capital efficient
    Bidders can place bids without needing to deposit wETH in the protocol. After approving an amount of wETH, they can make vBids, regular bids, or use make bids with the same wETH in protocols like Seaport.
  4. Control the number of options purchased
    When placing individual bids for every strike price and expiration in a market, they could all theoretically be accepted at the same time. vBids enforce a limit for the total number of options that could be acquired, making it easier to control the total option exposure.
  5. Simpler and Faster Cancellations
    vBids remove the need to spend gas to cancel a bid and instead can be canceled off-chain. Bidders only need to spend gas to adjust their wETH spending limit.