Glossary

ATM

At the money. A situation where the options strike price is identical to the current market price of the underlying security. If ETH is trading at 3500 and the strike of an ETH call is 3500, that call is ATM.

Automated Market Maker

A contract which accepts and manages liquidity using a delta-neutral options market making strategy. The entity that replaces centralized order books, which both buyers and sellers interact with. The AMM executes signed orders and hedges delta-exposure of its portfolio of options.

Cash-Settlement

A settlement method used for options contracts where upon expiration, instead of delivery of the actual underlying asset, an equivalent cash position is transferred. Cash-settlement alleviates the buyer from paying the strike price in order to exercise an option.

The ERC20 Token used to underwrite an option series. Siren protocol requires each option to contain locked up collateral to guarantee payment to traders upon exercise.

European Option

A version of an options contract that limits execution to its expiration date. Investors are not able to exercise the option early.

Expiration Date

The block time when an option series expires and is no longer purchasable on the AMM. When a series is expired traders' positions can be redeemed for locked collateral.

ITM

In the money. Refers to an option that has value in a strike price that is favorable in comparison to the prevailing market price of the underlying asset. That is, the asset price will have exceeded the strike price for a call on that asset, or the opposite in case of a put.

Liquidity Provider

Abbreviated as LPs, liquidity providers are users that add assets to an AMM pool. Siren LP’s provide liquidity to the AMM, which executes a delta-neutral options market-making strategy. LPs earn pro rata yields from trading fees.

LP Token

The token LPs receive for providing capital to the AMM. The LP token is an IOU for LPs collateral token. An LP can burn their LP token and receive their share of the AMM’s value.

OTM

Out of the money. An OTM call will have a strike price higher than the market price of the underlying asset. An OTM put will have a strike price lower than the market price of the underlying asset. If an option expires OTM, it has no value.

Premium

The price a buyer pays to buy an option contract. Siren Flow retrieves the premium from the hybrid on- and off-chain pricing oracle.

Pro Rata

A Latin term used to describe a proportionate allocation. When value is distributed pro-rata to LPs it is distributed in proportion to each LPs share of the total supply of LP tokens. If an LP has provided 10% of all liquidity to a pool, that LP will receive 10% of premium yield from options minted off that liquidity pool.

Quote Provider

An API that produces signed orders to be executed with the AMM

Series

A group of options with a specific expiration date, strike price, and underlying token. A single Siren AMM can trade multiple series that share the same underlying, collateral and price tokens. A series is identified by a unique seriesID.

Signed Order

A cryptographically signed payload containing information about options being traded and premiums paid/received. A single order can contain one or more legs, each leg describing an option being bought or sold.

Spot Price

The price of a token on the open market. Siren protocol obtains the spot prices of various tokens using onchain oracles such as Chainlink.

Settlement Layer

The set of smart contracts responsible for the creation of Siren options, minting tokens and locking up collateral.

Settlement Price

Spot price of a series’ underlying token once the series has expired and payout is being calculated.

Price Impact

The impact of a trade on its own price. The larger the trade, the more expensive it will become to fulfill.

NOTE: This is a living document that will continue to be updated as Siren evolves. To contribute, please visit Siren on GitHub. Specific questions may be answered and technical guidance may also be provided from time to time in the Siren Discord to those who are interested in building on top of the protocol.