Options

The Options module (contracts/options/Options.sol) implements European-style options with ERC-1155 fungible position tokens. Writers deposit collateral to create option series, and holders can exercise at expiry.

Option Types

Settlement Types

Creating an Option Series

Each series is defined by underlying asset, strike price, expiry, and type. All options with the same parameters are fungible via ERC-1155.

import "@luxfi/contracts/options/Options.sol";

Options options = Options(OPTIONS_ADDRESS);

// Create a WETH call option series
bytes32 seriesId = options.createSeries(
    WETH,                           // underlying
    LUSD,                           // quote token
    3000e18,                        // strike: $3,000
    block.timestamp + 30 days,      // expiry
    Options.OptionType.CALL,
    Options.SettlementType.CASH
);

Writing Options

Writers deposit collateral and receive writer position tokens (ERC-1155). The collateral is locked until expiry.

// Write 10 call options (requires collateral deposit)
uint256 positionId = options.write(seriesId, 10e18);

// Check collateral requirement
uint256 required = options.getCollateralRequired(seriesId, 10e18);

Collateral Requirements

Exercising Options

Holders exercise at or after expiry. Only in-the-money options produce a payout.

// Exercise 5 call options at expiry
uint256 payout = options.exercise(seriesId, 5e18);

// Preview payout before exercising
uint256 expectedPayout = options.getExercisePayout(seriesId, 5e18);

Payout Calculation

For a cash-settled call with strike $3,000 and spot $3,500:

payout = (spot - strike) * amount = ($3,500 - $3,000) * 5 = $2,500

Settling (Writer Collateral Return)

After expiry, writers reclaim unused collateral. If options expired out-of-the-money, writers receive their full collateral back.

// Settle writer position, reclaim remaining collateral
uint256 collateralReturned = options.settle(seriesId);

ERC-1155 Position Tokens

Position IDs are deterministic:

// Holder and writer positions have separate token IDs
uint256 holderPositionId = uint256(keccak256(abi.encodePacked(seriesId, false)));
uint256 writerPositionId = uint256(keccak256(abi.encodePacked(seriesId, true)));

Because positions are ERC-1155, they are:

• Fungible within the same series and side (writer/holder)
• Transferable on any NFT marketplace
• Composable with other DeFi protocols

Oracle Integration

Options use the unified Lux Oracle for settlement price determination. At expiry, the oracle's spot price determines whether options are in-the-money.

// Oracle provides the settlement price
(uint256 price, ) = oracle.getPrice(underlying);

Key Properties

• European-style: Exercise only at expiry, not before
• Fully collateralized: No margin calls or liquidation risk for holders
• Permissionless series creation: Anyone can create new option series
• Gas efficient: Single contract manages all series via ERC-1155