Good to know: Call options are financial contracts that give the option buyer the right, but not the obligation, to buy a crypto asset at a specified price within a specific time period. The crypto asset is called the underlying asset. A call buyer profits when the underlying asset increases in price.
Polynomial uses Uniswap v3 under the hood for the trade and the liquidity is managed by Polynomial's Protocol Controlled Liquidity(PCL). All users receive polynomial option token which is composed of options from various protocols which Polynomial aggregates. When a user buys a call option from the trade page he pays a small premium. An option premium is the current market price of an option contract.
For example, when a users buys a $ETH $5000 Call Nov 30 2021 expiry option, paying a $100 premium, it means they expect the price of $ETH to be above $5100 (strike + premium) by November 30 2021.
Trade put options
Good to know: A put option (or “put”) is a contract giving the option buyer the right, but not the obligation, to sell—or sell short—a specified amount of an underlying crypto asset at a predetermined price within a specified time frame. This predetermined price at which the buyer of the put option can sell the underlying security is called the strike price.
Put options are very similar to call options expect the underlying asset is minted using a stable coin (USDC).
For example, when a users buys a $ETH $5000 Put Nov 30 2021 expiry option, paying a $100 premium, it means they expect the price of $ETH to be below $4900 (strike - premium) by November 30 2021.
After expiry your option can get the value in collateral token (eg: ETH for ETH option) by settling it. You can read more about it 👇