Highly experimental, decentralizeddecentralized options platform Charm announced its mainnetmainnet launch today, promising users an innovative way to trade Ethereum (ETH) options contracts.
“Charm is a breakthrough Automatic Market Maker (AMM) that can create liquid options on the blockchain. By applying a prediction market scoring rule to the options world, we have invented a new model for options creation, pricing, trading, and settlement,” said the announcement.
In traditional finance, options are contracts that give buyers the right—but not the obligation—to purchase assets at a specified price on a set date in the future, for which they pay sellers a “premium.” In Charm’s case, the only supported asset is currently ETH.
Per the announcement, several key features ostensibly set Charm apart from similar platforms. For example, prices are determined exclusively by supply and demand, so the AMM doesn’t rely on external oracles for pricing.
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Additionally, users can choose to sell their options before the expiration date to receive their intrinsic and time value.
“So ETH is split up into two payoffs (call and covered call) that sum up to 1 ETH and people can buy either one from a prediction market AMM (since the prices sum up to 1). if they buy a covered call payoff, that's equivalent to holding 1 ETH and writing an ETH call, so they can get short option exposure this way,” Charm developer Max told Decrypt.
At the same time, such options can also be shorted and allow for lower slippage by relying on a single liquidity pool to provide options with different strike prices, the post added.
11. Other benefits
- Options are represented as ERC20 tokens so can easily be composed with other platforms - You don't need to worry about forgetting to exercise your options - ITM options are automatically exercised and you can claim payout at any time (even 5 years later)
However, the developers constantly stress that Charm is highly experimental and unaudited, urging users to not deposit more funds than they can afford to completely lose.
“Charm is an experimental protocol. It is not regulated, nor is it subjected to the laws and regulations applicable to firms, individuals, partnerships, or solo practitioners. You can lose up to 100% of your funds, with no recourse to compensation. Please ensure you do your own research and understand the risks before continuing,” numerous disclaimers warned.
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