feat: a call spread option contract and tests. #1854
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Chris-Hibbert
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Implementation of a fully collateralized call spread option, following Joe
Clark's description. This is a combination of a bought call option and a sold
call option at a higher strike price. The contracts are sold in pairs, and the
buyers of the two positions together invest the entire amount that will be
paid out.
This option is settled financially. Neither party is expected to have
ownership of the underlying asset at the start, and neither expects to take
delivery at closing.
zoe.startInstance() takes an issuerKeywordRecord that specifies the issuers
for the keywords Underlying, Strike, and Collateral. The payout uses
Collateral. The price oracle quotes the value of the Underlying in the same
units as the Strike prices.
creatorFacet has a method makeInvitationPair(), that takes terms
that specifies { expiration, underlyingAmount, priceAuthority, strikePrice1,
strikePrice2, settlementAmount, buyPercent }.
ownerFacet.makeInvitationPair() returns two invitations, which can be sold
separately. They settle when the priceAuthority announces the settlement amout
as of it's pre-programmed closing time.
closes: #1829
Chris-Hibbert
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| /** | ||
| * This contract implements a fully collateralized call spread. This is a | ||
| * combination of a call option bought at one strike price and a second call |
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Joe describes this as "a call at a lower strike and a put at a higher strike". I think a sold call option is different than a put.
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"One contract to rule them all" says "A more general structure is a call spread, which is a bought call at a lower strike and a sold call at a higher strike. This generalises calls, puts, binaries (including prediction markets), and futures." It later says (under "Fully collateralized call spread") "This is a call at a lower strike and a put at a higher strike."
I think the second is a mistake. It would produce the right outcomes for the long position, but the short position wouldn't have all the rights they should. I've asked for clarification in the doc
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Joe responded that they are both calls. The earlier (in the document) statement was correct.
| /** | ||
| * This contract implements a fully collateralized call spread. This is a | ||
| * combination of a call option bought at one strike price and a second call | ||
| * option sold at a higher price. The contracts are sold in pairs, and the |
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| * option sold at a higher price. The contracts are sold in pairs, and the | |
| * option sold at a higher price. The invitations are sold in pairs, and the |
I don't think we want to call the invitations contracts.
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Actually, this contract is not about selling invitations at all - that's a different level. This contract produces invitations.
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yep. thanks for the correction.
| * purchaser have ownership of the underlying asset at the start, and the | ||
| * beneficiaries shouldn't expect to take delivery at closing. | ||
| * | ||
| * The issuerKeywordRecord specifies the issuers for four keywords: Underlying, |
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Options shouldn't need an issuer specified. It's a Zoe invitation, right?
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Oh, I see, Zoe doesn't know about the invitationIssuer on a per contract level. Huh, wonder if we should pre-register that.
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I could go either way on that. We haven't needed it for other contracts to date. But you're right, it's a general Zoe facility.
| * The creatorInvitation has terms that include the amounts of the two options | ||
| * as longOption and shortOption. When the creatorInvitation is exercised, the |
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Do we mean terms or customProperties?
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you're right.
| * + create separate invitations to purchase the pieces of the option pair. | ||
| * (This would remove the current requirement that an intermediary have the | ||
| * total collateral available before the option descriptions have been | ||
| * created.) |
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I think there's no purchasing of the option pair happening in this contract. The creator isn't purchasing them, and if we split up that role, the two parties wouldn't be purchasing the options either.
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There is currently no purchasing of the option pair in this contract.
This goes back to my previous approach. I think it would still be valuable, as it's required in order to not have an intermediary have to front the funds.
| terms, | ||
| ); | ||
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| const optionAmount = await invitationIssuer.getAmountOf(creatorInvitation); |
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why not getInvitationDetails?
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| const aliceProposal = harden({ | ||
| want: { LongOption: longOptionAmount, ShortOption: shortOptionAmount }, | ||
| give: { Collateral: bucks(300) }, |
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should we call this margin instead?
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This is a fully collateralized call spread, so there's no margin.
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I think people call "collateral" margin even when it is fully collateralized, but I could be wrong. Take a look at Joe's doc.
| const aliceOption = await aliceSeat.getOfferResult(); | ||
| t.truthy(invitationIssuer.isLive(aliceOption)); |
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Hang on, there is no offer result returned from the creatorInvitation seat. How is this happening?
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Ah, invitationIssuer.isLive returns a promise which is truthy. This is not testing what it should be.
| // Underlying is in Simoleans. Collateral, strikePrice and Payout are in bucks. | ||
| // Value is in Moola. The price oracle takes an amount in Underlying, and | ||
| // gives the value in Moola. | ||
| test('callSpread below Strike1', async t => { |
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It'd be nice to have unit tests of more of the internals of the contract, like the collateralShare calculations.
| bucks(225), | ||
| ); | ||
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| // Bob buys the Short invitation |
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| // Bob buys the Short invitation | |
| // Carol buys the Short invitation |
This includes changes from the base PR and the separate PR for the updates to the oracle API.
extract calculation for testing purposes. save the invitationIssuer as an issuer in the contract exit contract when done. use trade() rathern than reallocate() some renaming
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Implementation of a fully collateralized call spread option, following Joe
Clark's description. This is a combination of a bought call option and a sold
call option at a higher strike price. The contracts are sold in pairs, and the
buyers of the two positions together invest the entire amount that will be
paid out.
This option is settled financially. Neither party is expected to have
ownership of the underlying asset at the start, and neither expects to take
delivery at closing.
zoe.startInstance() takes an issuerKeywordRecord that specifies the issuers
for the keywords Underlying, Strike, and Collateral. The payout uses
Collateral. The price oracle quotes the value of the Underlying in the same
units as the Strike prices.
creatorFacet has a method makeInvitationPair(), that takes terms
that specifies { expiration, underlyingAmount, priceAuthority, strikePrice1,
strikePrice2, settlementAmount, buyPercent }.
ownerFacet.makeInvitationPair() returns two invitations, which can be sold
separately. They settle when the priceAuthority announces the settlement amout
as of it's pre-programmed closing time.
closes: #1829