Option Pricing
💸 Option Pricing & Fee Model
The cost of holding a perpetual option on Scall.io is based on a real-time rent model, paid by traders to Liquidity Providers (LPs) in exchange for access to locked liquidity at a specific strike price.
📈 How Pricing Works
When a trader opens an option, they are renting liquidity from LPs. This rent is charged continuously per block, and is calculated based on the Open Interest (the size of the position) and a default Annual Percentage Rate (APR).
The default rent is 20% APR on the Open Interest.
This means that for every $100 of notional exposure, the trader pays $20 annually (pro-rated per block).
The rent continues as long as the position is open.
💡 The larger the position, the higher the rent.
🧮 Why This Model?
This model ensures that:
All LPs providing liquidity at the same strike price earn the same APR (e.g., 20%).
Traders effectively pay for the risk and opportunity cost LPs take by locking their capital at specific strike levels.
LPs are compensated fairly:
They lock assets (e.g., BTC) at predefined strike prices.
In doing so, they accept the risk that their assets might be exercised (e.g., swapped for USDC at the strike price).
In return, they receive a stream of yield at the defined APR.
This creates a market equilibrium:
LPs are incentivized to provide liquidity where there is demand.
Traders pay more to access strike prices that are further out of the money, because LPs must lock larger amounts of capital to ensure 20% APR is met.
🧮 Trader Fees & Strike Price Impact
For traders, this fee model means:
The same trade size at a higher strike price will cost more in rent.
That’s because liquidity is more expensive the further away it is from the current market price — LPs are still owed 20% APR on that locked capital, even if it's rarely exercised.
This creates a dynamic pricing curve:
Closer-to-market strikes → lower cost
Farther-from-market strikes → higher cost
🏛 DAO Governance
The default APR (currently 20%) is not fixed forever.
It can be adjusted per market (e.g., BTC/USDC, ETH/USDC) by the Scall.io DAO to reflect changing market conditions, liquidity demands, and protocol goals.
📌 Summary
LPs earn 20% APR on locked liquidity at a strike.
Traders pay rent continuously to maintain positions.
Open Interest and strike price level both affect the rent amount.
The DAO can update the rent rate per market.
This mechanism creates a self-regulating, yield-generating system for LPs while keeping option pricing fair and transparent for traders.
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