Writing Approach
How we compose a ERC-20 hedge on Xeon Protocol.
Hedge structure factors:
Underlying assets - ERC-20 tokens
Strike Price
Premium / Cost
Expiry Date
Underlying Value - Seller Collateral Value
Strike Value
Factors Defined:
Underlying Assets - refers to the ERC20 tokens the seller or writer hedges.
Strike Price - refers to the price in paired currency the tokens being hedged have to cross
Premium - refers to the cost or price the buyers have to pay to buy the rights to the hedge
Expiry Date - refers to a future date to which the hedge expires and settlement follows.
Underlying Value - refers to the value in paired currency, of the underlying assets or ERC20 tokens in the hedge. These are the tokens being hedged by the seller or hedge writer.
Other Definitions:
Settlement Value - refers to the market value in paired currency of the underlying assets at the time of settlement.
Payoff - refers to the profit or proceeds credited to the winning party, taken from the losing party's collateral.
Writing a Hedge
You can write: Call Options, Put Options and Equity Swaps using your ERC-20 tokens as underlying assets or collateral.
In order to write a hedge on our protocol you need to specify these 4 parameters::
Hedge Type
ERC-20 Token Address - of the underlying assets being Hedged
Token Amount - amount of tokens to use as underlying assets or collateral
Premium or Cost - in paired currency to buy the hedge
Expiration Date - the day or timestamp at which the hedge expires for both parties
After filling those parameters on our Dapp, the Writer simply clicks "write" to submit the transaction to our protocol. Our protocol handles the rest, deducting the Writers deposit balances in the Vault, then locking them in the deal as collateral at market value, until settlement is triggered.
That's it!
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