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Oracles

Price Feed Oracles

Price Feed Overview

In order to create an options market for a given token pair, a valid oracle must be available to determine the value of an option (based on spot price) at expiration. Premia v3 pools can be established out-of-the-box with Chainlink VWAP Price feeds, RedStone Classic TWAP price feeds or Uniswap v3 TWAP Price feeds. Additionally, any Price Oracle implementing the IOracleAdapter interface can be used to initialize a new option pool.
By default, options will be automatically settled by an address maintained by the protocol, but Option holders can at any time designate an autoSettleAddress and an autoMaxSettleFee. Once set, the autoSettleAddress can exercise or settle options for the user after expiration, and be given a credit to compensate for the gas fees associated with making the call.
For convenience a keeper bot is then used to hydrate each pool with its corresponding settlement price if the option has expired. However, this value can also be populated within each pool by any user who calls the exercise or settle functions.
Chainlink has many available feeds which can be found here. If a direct pair is not available when a pair is upserted to the ChainlinkAdapter, an attempt will be made to combine multiple price paths to create a valid price feed.
To initialize a pool, Chainlink is queried with the selected pair, and if a valid market exists, a VWAP price is returned to help determine the initializationFee.

RedStone

RedStone is a Modular Oracle delivering token pricing by fetching price feeds from off-chain sources (CEXes, aggregators) and on-chain sources (DEXes).
Its support for all EVM-compatible Layer1s and Layer2s, a lot of customization options (TWAPs, exact pricing at the time of settlement), and multiple available data feeds (long-tail, LP, LST, and Ecosystem-native tokens, as well as custom feeds) offer an advantage to Premia for new markets creation and cross-chain expansion.
For a comprehensive understanding, please refer to the RedStone Documentation.

Determining Settlement Price

Ideally, the settlement price of any option would be determined by the spot price that corresponds exactly to 8AM UTC. If a price is not available at this timestamp, there are several actions that are taken to determine the most appropriate price:
  1. 1.
    A valid price nearest to 8AM UTC on the expiration date is queried. This may end up being at or before 8AM UTC.
  2. 2.
    If the last price update is more than 25 hours before expiration, the pool will go into a holding state until a fresh price update is received. In the event the oracle is unavailable for an extended period, a price override may be applied via governance to release the pool from the holding state

3rd Party Oracles

Any price feed that implements the IOracleAdapter smart contract interface can be used to initialize a new pool. However, only well-established price feeds will be shown directly to users on the Premia Interface or using the Premia v3 SDK.

IV Oracle

<UNFINISHED SECTION SEE NOTES BELOW>
Pending a change to amberdata instead of Deribit
  • ESSVI → model derived from Deribit data (subject to change)
  • Used for → Underwriter Vault & Margin Vault
  • Updates → every minute