The Sage Walletjust released version 0.12.0 and there are some very cool features. The one that has me excited is the Options Contract. To explain the options contract completely, I need to give some background on Chia and Offers.
BACKGROUND
What is Chia Chia is a blockchain that's been around since March 2021. There's plenty of information about it available at their website https://chia.net. The thing you need to know is Chia has Offer Files.
What are OFFER FILES
Offer files let anyone trade assets/tokens securely with another person anywhere in the world. The way an offer works is like this:
Bob wants to buy some XCH. Bob has some USDC. Bob would use the Sage Wallet or any other chia wallet to generate an offer file. In Sage the process looks like this:
Generating this offer would create a text string that is actually 1/2 of a valid signed transaction for Chia. What does that mean exactly. It means that anyone who has 1.5 XCH and wants to trade it for 10 USDC could import that string into their wallet and sign the other 1/2 of the transaction. That makes the transaction valid and able to be accepted by a Full Node on the Chia Blockchain.
The best part of offer files is that they are either Valid or Not Valid. The only way this trade goes though is if it is 100% complete. NO SLIPPAGE, NO SANDWICH ATTACK. The owners of the coins/tokens keep custody of them up to the block the offer is accepted or canceled.
Now let's talk about Options
WHAT IS AN OPTION
In the simplest form, it's like an offer file that only 1 person can execute. Offer Files normally are open for anyone to be able to execute if they have the other side of the offer. Options on the other hand are limited to just the owner of the option contract. The best thing is the option itself is a coin, so it can be put into offers that anyone can accept.
What can you do with options? Just about anything you can do with stock options, but so much more. Options are limited to a certain size like in the stock market. You don't have to offer 100 tokens contracts, you can do a 1 token contract, a 20.3349 token contract, really almost whatever you want.
Covered Calls
Example: The current price of XCH is 9.50 per XCH. You could create a contract to sell 50 XCH at 10.00 each. You can then sell that option on the open market using the Offer system mentioned above. You have to fully fund the 50 XCH in the option, but if the option doesn't not execute before the expiration date, then the XCH is returned to your wallet.
If you sold the contract for 6.00 USD, that money would be immediately available in your wallet to spend.
Cash Secured Puts
Think the opposite of the Covered Call examples. This time you can create a contract to buy 50 XCH at 9.00 each. You lock up the 450.00 USD in the contract and sell it on the open market. This gives buyers a hedge against price drops.
Short Term Over Collateralized Loans
This one is very exciting for me. Let's assume that the price of XCH is 10 per XCH for easy math.
BOB wants to put his assets to work. He has 100 XCH and 1000 USD available for trading. Bob decides to offer a 30 day loan. Bob decides he wants to have 75% collateral for his loan to make him feel safe. He also thinks he will charge a 10.00 fee for the 30 day loan.
Bob locks up 100XCH at a strike price of 750.00 (100xch * 10USD * 0.75 collateral) that expires in 30 days.
ALICE takes this offer. She sends BOB 100XCH and receives $740 USD and a Contract to buy 100XCH for 750USD. Alice can now use this cash to try to leverage her position in XCH or to pay bills. At any time ALICE can exercise the contract to recover her XCH. She also has another choice. She can SELL this option to someone else. If the price of XCH stays steady at 10 per xch, then this contract is in theory worth $250 + extrinsic value.
This type of trading can only be done on the Chia Blockchain, and the best part is you don't have to rely on 3rd parties, exchanges or any other counter party.
