Writing Approach
How we compose a ERC20 hedge on Xeon Protocol.
Hedge structure factors:
Underlying assets - ERC20 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.
Creating - Writing a Hedge
You can write: Call Options, Put Options and Equity Swaps using your ERC20 tokens as underlying assets.
In order to write a hedge on our protocol you need to specify these 4 parameters::
Hedge Type
ERC20 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
That's it! Our protocol functions handles the rest.
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