# Option Pricing

ClickOptions options are priced by our **proprietary Flow-Implied Pricing Engine**, powered by both **professional market-making** and the **ClickVault risk pool.**

This ensures fair, liquid, and consistently cheaper option premiums compared to traditional implied-volatility-only models.

#### Why Our Pricing Is Cheaper

* **Flow-Implied Pricing engine** \
  The engine considers real trading behavior — call/put demand, flow imbalances, sentiment — to adjust premiums more fairly.
* **Dynamic Discounts**\
  When our portfolio is unbalanced (too many calls or puts), the system temporarily reduces prices on the corresponding side to encourage flow that restores balance. This naturally keeps the market structure healthy while providing traders with cheaper entries.
* **Fair Fee Model**\
  Base fee: **0.025%**, already lower than typical market rates.\
  Additional **up to 45% discounts** when paying with our token → even cheaper all-in costs.

Together, these mechanisms create pricing that is not only more efficient and consistently lower, but can also **open arbitrage gaps between ClickOptions and other venues** — opportunities traders can directly benefit from.

#### How Discounts Are Determined

Discounts applied to an option premium are influenced by three main components:

1. **Portfolio Balance (Delta)** — how much the overall book is tilted long or short.
2. **Time to Expiry** — longer-dated contracts tend to carry a slightly higher discount.
3. **Moneyness** — contracts farther out-of-the-money (OTM) are priced with additional discount to avoid overcharging traders.

*Note on OTM Options:* Far OTM contracts are more likely to expire worthless. Our pricing ensures they are **offered at fair value instead of inflated premiums**, but it does not change their inherent risk profile.

### Vault-Aware Pricing Controls

Pricing is directly linked to Vault utilization.

NOP = Net Open Position

$$
U = \frac{NOP\_{use}}{UtilizationCap}
$$

Discount factor:

$$
DiscountFactor = f\_{\Delta, T, M} \times \left( 1 - \min(U, 1) \right)
$$

* On the **offsetting side**, discounts increase with:

  $$
  U
  $$
* On the **exposed side**, discounts fade as 

$$
U \to 1
$$

* Capacity limit\
   

  $$
  U \geq 1 ;;\Rightarrow;; \text{ASK is disabled on the exposed side}
  $$
* PnL safety rule<br>

  $$
  PnL\_{loss} \geq VaultCapital ;;\Rightarrow;; \text{Exposed side quotes are halted completely}
  $$

### Final Premium

$$
FinalPremium = ReferencePrice \times \left( 1 - DiscountFactor \right)
$$

Where:

* **ReferencePrice** is derived from our proprietary index
* **DiscountFactor** adjusts with delta, time, moneyness, and Vault utilization

#### Example

**Instrument**: `BTC-250926-115000-C`

* Reference Bid: 500 USDT
* Base after fees: 490 USDT
* Portfolio delta is long → calls discounted to restore balance
* Time-to-expiry = 30 days, strike slightly OTM

**Result:**

* Discount applied ≈ 7%
* Final ask price = 490 × (1 – 0.07) ≈ **455 USDT**

The trader buys at **455 USDT** vs. a reference of 500 USDT → cheaper premium.

### Why Pricing is Cheaper

* Portfolio netting = lower required margin → lower premiums
* Dynamic discounts = attract balancing flow → tighter spreads
* Vault capacity = efficient capital use → avoids redundant margin

This sometimes even opens **arbitrage gaps** versus other venues.

### Assurance of Settlement

Pricing integrity is backed by:

* **ClickVault** collateral (see [Margin](/trade/margin.md))
* **Insurance and reinsurance layers** (see [Risk Assurance](/trade/risk-assurance.md))
* **ClickOptions treasury reserves** as an additional backstop


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