How it Works

Scall.io connects two types of participants:

• Traders, who open perpetual option contracts

• Liquidity Providers (LPs), who supply the capital that powers these contracts

👤 Traders

To open a perpetual options contract, a trader must deposit collateral. This collateral is used to continuously pay a fee to keep the position active, charged per block.

• Traders are required to maintain at least two weeks’ worth of rent in collateral to initiate a contract.

• If the balance drops below one week of rent, the contract becomes eligible for liquidation.

🔻 Liquidation Scenarios

• Out of the Money (OTM):

  • The contract is canceled.

  • A 12% penalty is applied to the remaining collateral, paid to the liquidator.

• In the Money (ITM):

  • The liquidator executes the contract by providing the liquidity required to settle.

  • The user is still penalized, and the liquidator receives the profits.

Contracts that are OTM can be canceled without execution. However, ITM contracts require liquidity to execute.

🧠 Example: A user holds a Call Option on BTC with a strike price of $50,000. If BTC trades at $70,000, the user must provide $50,000 USDC to claim 1 BTC from the protocol.

In future updates, flash loans will be introduced to allow users to exercise ITM options without upfront capital, capturing the profit (the price difference) directly.

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💧 Liquidity Providers

To enable traders to open and execute option contracts, Liquidity Providers must deposit capital into the protocol.

• LPs earn real-time fees taken from trader collateral.

• Their deposits back contract execution and ensure protocol liquidity.

To support Call Options at a specific strike price:

• LPs deposit Bitcoin at that strike price.

• This liquidity is reserved and locked to guarantee execution if a trader exercises their option.

🔁 In a BTC/USDC market, this means the LP’s BTC could be exchanged for USDC at the strike price.

LPs should be aware of market risks and can choose to hedge their exposure. The protocol will provide guidance on various hedging strategies.

Additionally, the protocol structures available strike prices into intervals aligned closely with the current market price. This design ensures that both liquidity providers and traders interact at active, relevant price levels.

For call options, strike prices are always set above the current asset price, and for put options, they are set below — preventing traders from exploiting the system for instant profits through market manipulation.