> For the complete documentation index, see [llms.txt](https://docs.clickoptions.ai/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.clickoptions.ai/trade/option-pricing.md).

# Option Pricing

ClickOptions options are priced by a **flow-implied pricing framework**, operated by a professional market maker under an enforceable ClickOptions mandate, with a future ClickVault risk pool designed to add community risk capital.

The framework aims to deliver fair, liquid and competitively-priced option premiums relative to implied-volatility-only models — subject to risk, minimum-premium and quote-width constraints.

#### How the Pricing Works

* **Flow-implied pricing**\
  Quoting responds to real trading behaviour — call/put demand, flow imbalances and inventory — to adjust premiums rather than relying on a static spread over a reference model.
* **Dynamic, inventory-aware discounts**\
  When the book is unbalanced (too many calls or puts), pricing on the offsetting side becomes relatively more attractive to encourage flow that restores balance, keeping market structure healthy while offering competitive entries.
* **Enforceable market-making standards**\
  The market maker quotes continuously within a **published maximum-quote-width matrix** and a **contractual price-improvement obligation**. ClickOptions specifies, monitors and enforces the framework.
* **Fair fee model**\
  Base fee **0.025%** (capped at 10% of premium), with a **disclosed CLICK fee discount** where eligible commissions are settled in CLICK (schedule confirmed before listing).

> Competitive pricing can narrow the gap to other venues, but ClickOptions does not guarantee profitable arbitrage. Actual prices depend on contract comparability, timestamp, size, market conditions, execution costs and available liquidity.

#### How Discounts Are Determined

The pricing adjustment is influenced by three main components:

1. **Portfolio Balance (Delta)** — how far the overall book is tilted long or short.
2. **Time to Expiry** — longer-dated contracts may carry a slightly different adjustment.
3. **Moneyness** — because the adjustment acts in volatility space, it concentrates on time value; far out-of-the-money contracts are priced at fair value rather than inflated premiums, without discounting intrinsic value.

*Note on OTM Options:* Far OTM contracts are more likely to expire worthless. Pricing offers them at fair value, but this does not change their inherent risk profile.

### Capital-Aware Pricing Controls

Pricing is subordinate to capital and risk limits. In the current venue the market maker carries and hedges the option book; in the designed ClickVault architecture these controls are enforced against pooled capital.

$$
U = \frac{RiskExposure}{AvailableCapital}
$$

* On the **offsetting side**, competitiveness increases as capacity allows.
* On the **exposed side**, the adjustment fades as utilisation rises:

$$
U \to 1
$$

* Capacity limit:

$$
U \geq 1 ;;\Rightarrow;; \text{quoting is restricted on the exposed side}
$$

* Hard solvency rule:

$$
L^{stress} \geq \text{Risk Capacity} ;;\Rightarrow;; \text{the discount is set to zero and exposed-side quoting is halted}
$$

### Final Premium

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

Where:

* **ReferencePrice** is derived from the ClickOptions composite index
* **DiscountFactor** adjusts with delta, time, moneyness and capital utilisation, within governance limits

#### Example

**Instrument**: `BTC-260926-115000-C`

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

**Result:**

* Adjustment applied ≈ 7%
* Final ask price ≈ 490 × (1 − 0.07) ≈ **455 USDT**

The trader buys at ≈ **455 USDT** vs a reference of 500 USDT.

### Assurance of Settlement

Pricing integrity is supported by:

* Market-maker inventory and hedging (today), and **ClickVault** collateral in the designed architecture (see Margin)
* **Insurance and reinsurance layers** (see Risk Assurance)
* **ClickOptions treasury reserves** as an additional backstop


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