How It Works
Three simple steps: Deposit collateral → Create option → Exercise & settle
📋 The Flow
┌─────────────────────────────────────┐
│ 1. Market Maker Deposits │
│ Collateral → Vault │
└─────────────────────────────────────┘
↓
┌─────────────────────────────────────┐
│ 2. Buyer Creates Option │
│ Premium → Market Maker │
│ Collateral → Locked │
└─────────────────────────────────────┘
↓
┌─────────────────────────────────────┐
│ 3. Buyer Exercises (Before Expiry) │
│ Assets Transfer Automatically │
└─────────────────────────────────────┘1️⃣ Deposit Collateral
Market Maker Setup:
Create seller vault (one-time)
Deposit assets: SOL, WBTC, USDC
Maintain sufficient balance
Vault Tracks:
✅ Total balance
✅ Available (can withdraw)
✅ Locked (reserved for options)
2️⃣ Create Option
For Buyers
Request Quote → Submit parameters via UI
Receive Quotes → Multiple MMs respond (~200ms)
Select Best → Choose lowest premium
Confirm → Sign transaction in wallet
On-Chain Verification
Smart contract checks:
✅ Signature is valid
✅ Quote hasn't expired (~40 seconds)
✅ Vault has enough collateral
✅ Quote hasn't been used (BRP protection)
Asset Movement
Premium: Buyer → Market Maker (USDC)
Collateral: Vault → Option Contract (Locked)3️⃣ Exercise & Settle
CALL Exercise
Buyer pays: Strike (USDC)
Buyer receives: Base asset (SOL/WBTC)PUT Exercise
Buyer pays: Base asset (SOL/WBTC)
Buyer receives: Strike (USDC)If Not Exercised
Option expires → Market maker withdraws collateral
🛡️ Quote Replay Protection
Problem: Malicious reuse of old quotes
Solution: Bounded Replay Protection (BRP)
Each MM has 2,000 unique slots
Each quote uses one slot
Slot counter increments after use
Used quotes cannot be replayed
⏱️ Timing
Option Expiry
1-30 days
Stored as Solana slots
Quote Expiry
~40 seconds
Prevents stale pricing
Example: 7-day option = 1,512,000 slots (~400ms per slot)
✅ Safety Guarantees
For Buyers
Collateral locked on-chain
Cryptographic quote authenticity
Exercise anytime before expiry
For Market Makers
Quotes cannot be forged
BRP prevents replay attacks
Collateral auto-released if expired
For Both
All operations on-chain
No trusted intermediaries
Automatic settlement
💡 Example
Alice buys SOL-CALL:
1
Alice requests: 1 SOL @ $150, 7 days
→
2
Bob (MM) quotes: $7.50 premium
→
3
Alice accepts
Premium paid, 1 SOL locked
4
SOL rises to $180
→
5
Alice exercises
Pays $150, receives 1 SOL
6
Profit
$180 - $150 - $7.50 = $22.50
📚 Learn More
Option Types → CALL vs PUT details
Smart Contracts → Technical architecture
Glossary → Key terms
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