How to Ensure Fairness in Option Contracts

Protocol 4.2 ensures that option contracts maintain correctness, exercisability, and compensation. The protocol guarantees that holders and writers either retain their assets or exchange them correctly upon exercise, allows the holder to exercise options without delay, and offers compensation if the exercise fails.

Table of Links

A. Codes

B. Proofs

5.2 Option Properties

In addition to the properties of the protocol during the option transfer process, here we explore the properties of option contracts.

• Option correctness: If both the holder and writer are conforming, either the exercise does not occur, the holder does not lose their collateral and the writer does not lose their collateral and guarantee; or upon completion of the exercise, they will each receive the other’s collateral, and the writer will reclaim their guarantee.

• Exercisablity: During the transfer of the writer position, the option holder ...