Users: Option Rewards and What You Can Do With Them

Overview

This page will serve as an introductory walkthrough for individuals who have received call options through an airdrop or liquidity mining reward system. During this walkthrough, we will cover the basic terminology of options, how they function, and how holders of these options can use them.

What are the options?

An option is a contract that gives its holders the right to buy or sell an asset at an agreed-upon price and date. There are two primary styles of options contracts: American and European.

American-style options give their holders the right to exercise up until the expiration date. European style options give their holders the right to exercise at the time of expiration.

Protocols utilizing Fusion for their airdrop and liquidity mining initiatives are rewarding their users with American-style options. This provides recipients of these option rewards with the most flexibility because they can choose to exercise their option at any time up until the expiration date.

What are call options?

There are two types of option contracts: calls and puts. For the purposes of this walkthrough we will focus solely on call options.

Call options give their holders the right to buy an asset at the option’s strike price up until the expiration date. On the other hand, put options give their holders the right to sell an asset at the option’s strike price up until the expiration date.

What can I do with my call options?

Let’s take a look at an example scenario for the process of exercising call options.

Exercising A Call Option Example: User XYZ has received an airdrop of call options on $JFI tokens. The contract size is 100 $JFI with a strike price of $2.00 and an expiration date of May 27th. The current market price of $JFI is $2.25. On May 25th, User XYZ decides they would like to exercise their options. User XYZ purchases 100 $JFI tokens from the option writer at the strike price for a total cost of $200. User XYZ can now choose to sell their 100 $JFI tokens on the market for $2.25 for a total value of $225 and take the $25 difference in profit, or continue holding their $JFI tokens.

The following is a simple visualization created by Jungle Finance to help recipients of their airdrop better understand what they can do with their $JFI call options