I’ve been scratching my head and asking my friends in an effort to try figuring out how the vanilla options are priced on Coinut. I made a calculator in excel, but my numbers were always off compared to what the market was showing. Now I’ve finally found the “trick”. The index that the options are settled to is BTC/USD number according to an aggregate of prices on various 3rd party exchanges. The options themselves are traded in bitcoins and settled in bitcoins, so all the option prices need to by divided by the strike price of the option to get the value of the option in bitcoins (make the bitcoin price the denominator).
To calculate the payoff on a vanilla option, the formula is: (underlying – strike) * multiplier / strike. For example, say the strike price is 580, the index is 600, and the contract size is 0.01, the intrinsic value of a call is (600 – 580) * 0.01 / 580 = 0.000345.
After getting passed this very basic challenge, I went back to my calculator to see what the implied vols are. Turns out they are huge, 65% implied volatility for at the money 3.6 weeks in the future. Wow.
