Opyn

Opyn is a capital-efficient DeFi options trading protocol that allows users to buy, sell, and create Ethereum-based options. DeFi users and products rely on Opyn’s smart contracts and interface to hedge themselves against DeFi risks or take speculative positions on different cryptocurrencies. Opyn uses 0x’s unique off-chain relay, on-chain settlement architecture, to offer free limit orders to its users.

Key points

• Options are derivatives contracts that give the buyer the right, but not the obligation, to buy or sell a fixed amount of an underlying asset at a fixed price on a specific date (for European options).
• People use options primarily for income generation, speculation, and hedging:
• DeFi traders use options as a risk-hedging tool (i.e., limits downside losses on declining asset prices).
• Speculators use options to gain low-cost, leveraged directional exposure with limited downside risk.
• Income seekers use options for recurring yield/income generation.
• Options are different from other derivative contracts (forwards, futures, etc.) in that with any options trade, the holder has the right, but not the obligation, to exercise their contract.

By using limit orders, traders can specify a set price where they are willing to buy or sell options rather than buying or selling based on current market prices. If the asset does not reach the specified price, the order will not be filled. Below are two scenarios when it might make sense to trade options + use a limit order.

• Put option: a financial contract that gives the option buyer the right, but not the obligation
• Call option: a financial contract that gives the option buyer the right, but not the obligation, to buy an asset at a specified price for a specific amount of time