The option lifecycle

Create

The issuer fixes the terms, deposits collateral into a separate escrow, and receives the option NFT. Funding and NFT issuance happen in one atomic transaction.

Transfer

Before expiry, the NFT can move to another holder. The new holder receives the exercise right; the issuer and fixed token terms stay the same.

Exercise

Before expiry, a holder other than the issuer can exercise once. The holder pays the exact payment amount to the issuer and receives the exact collateral amount. The option closes and the NFT burns in the same transaction.

Partial exercise and issuer self-exercise are unsupported. Standard NFT approvals allow transfers, but an approved operator cannot exercise directly as an operator; it could transfer the NFT to itself and exercise as the holder.

Cancel

Before expiry, the issuer can cancel only while holding the NFT. Cancellation burns the NFT and returns available collateral, capped at the original deposit.

Expire and reclaim

At the expiry timestamp, transfer and exercise stop immediately. There is no grace period or automatic settlement transaction.

Only the issuer can reclaim the unexercised collateral, even if someone else holds the NFT. Reclaim burns the NFT and returns the available collateral, capped at the original deposit. Expiry itself does not move tokens; the issuer must submit a reclaim transaction.

After closure

A closed option cannot settle again. Its terms remain queryable after the NFT burns. The issuer can separately recover residual ERC-20 balances after exercise, cancellation, or reclaim.

If a required transfer fails, the whole transaction reverts and can be retried. A collateral shortfall makes exercise fail; cancellation and reclaim may return a reduced balance, including zero when the token permits it.

Source: options-v1 specification. See also risks and limitations.