Ask
The lowest price a seller is willing to accept for an asset.
Glossary
Here’s your point of reference for the technical jargon of DeFi options.
A
Arbitrage
A trading strategy that exploits price differences of the same asset across different markets to earn a profit.
American-style Option
An option contract that allows the holder to exercise the option at any time before its expiration date.
Annual Percentage Rate (APR)
The annual interest rate charged for borrowing or earned for lending.
Annual Percentage Yield (APY)
The rate at which an investment in cryptocurrency earns interest over a year.
Automated Market Maker (AMM)
A decentralized exchange that uses a mathematical algorithm to set the price of assets and liquidity pools.
Altcoin
Any cryptocurrency other than Bitcoin.
Atomic Swap
An exchange of cryptocurrencies from separate blockchains without the involvement of a centralized intermediary.
B
Bear Call Spread
An options trading strategy that involves selling a call option at a higher strike price and buying a call option at a lower strike price, resulting in a net credit for the trader.
Bear Put Spread
An options trading strategy that involves buying a put option at a higher strike price and selling a put option at a lower strike price, resulting in a net debit for the trader.
Bearish
A market sentiment that indicates the expectation of a decline in the price of an asset.
Bid
The highest price a buyer is willing to pay for an asset.
Black-Scholes
A popular mathematical model used to calculate the theoretical price of an options contract.
Breakeven Price
The price at which an options trader neither profits nor loses from a trade.
Bull Call Spread
An options trading strategy that involves buying a call option at a lower strike price and selling a call option at a higher strike price, resulting in a net debit for the trader.
Bull Put Spread
An options trading strategy that involves selling a put option at a lower strike price and buying a put option at a higher strike price, resulting in a net credit for the trader.
Bullish
A market sentiment that indicates the expectation of a rise in the price of an asset.
Blockchain
A decentralized, distributed ledger that records the provenance of digital assets across many computers (nodes.)
Burn
The process of permanently removing coins from circulation, reducing the total supply.
C
Call Option
An options contract that gives the holder the right, but not the obligation, to buy an underlying asset at a predetermined price and time.
Collateral
Assets pledged as security for a loan or options contract.
Composability
The ability of decentralized applications to interact with each other seamlessly.
Concentrated Liquidity
A liquidity pool mechanism where liquidity providers are able to set a tight range of prices or premiums in which their liquidity will be utilized.
Cryptocurrency
A type of digital currency that utilizes cryptography (commonly a blockchain) for security.
Custodial
A system or service where a third-party entity holds and manages assets on behalf of users, typically involving a transfer of ownership or control to that entity.
Cold Storage
The practice of storing cryptocurrency offline to safeguard it from theft or hacking.
Consensus Mechanism
The method a blockchain uses to agree on the state of the network.
Cross-Chain
Refers to the ability to move or interact with cryptocurrencies across different blockchain networks.
D
Decentralized Autonomous Organization (DAO)
A decentralized organization that operates using a decentralized governance system built upon smart contracts and blockchain technology.
Derivative
A financial instrument whose value is derived from an underlying asset or set of assets.
Dutch Auction
An auction in which the price of the asset is gradually lowered until a buyer (or lot of buyers) is willing to buy it.
Decentralized Finance (DeFi)
A financial system built on public blockchains such as Ethereum, where traditional financial services are provided without the need for intermediaries like banks or brokers.
Decentralized Exchange (DEX)
A type of cryptocurrency exchange that allows for direct peer-to-peer transactions to take place online securely and without the need for an intermediary.
Decentralized Application (dApp)
An application that is running on a blockchain network with trustless protocols.
Dust
A small amount of a given cryptocurrency, so small that it's considered not worth dealing with.
E
Expiration Date (Maturity)
The date on which an options contract expires.
Exercise
The act of using an options contract to buy or sell an underlying asset.
Extrinsic Value
The portion of an options contract's premium that reflects the time value of the option.
European-style Option
An option contract that can only be exercised at the expiration date.
Exotic Option
An option contract which has features such as multiple payoff triggers that make it more complex than commonly traded vanilla options.
ERC-20
A standard for tokens on the Ethereum Virtual Machine (EVM).
ERC-721
A standard for non-fungible tokens (NFTs) on the Ethereum Virtual Machine (EVM).
F
Fully Collateralized
A financial derivative that is fully backed by collateral.
Fiat
Government-issued currency that is not backed by a physical commodity, like gold or silver.
Fork
A split in a blockchain that results in two paths—one that follows the old protocol and one that follows the new protocol.
Faucet
A website or app that rewards users with small amounts of cryptocurrency for completing simple tasks.
G
Gamma
A Greek that represents the rate at which an options contract's delta changes in response to changes in the price of the underlying asset.
Gas Fees
The transaction fees that must be paid to successfully conduct a transaction or execute a contract on a blockchain.
H
Hedging
A strategy used to minimize the risk of a loss by taking an offsetting position in another asset.
Halving
An event in which the reward for mining new blocks is halved, meaning miners receive 50% fewer cryptocurrencies for verifying transactions.
Hash Rate
The speed at which a miner is able to perform hash functions, often used as a measure of computational power.
I
Interstellar Trading Competition
A prestigious rite of passage held at the testnet launch of Premia Blue for the new recruits at Premia Academy.
Impermanent Loss
A loss incurred by liquidity providers in a liquidity pool when the price of the assets in the pool changes.
In-the-Money (ITM)
An options contract whose strike price is favorable compared to the current market price of the underlying asset.
Intrinsic Value
The inherent worth of an options contract, determined by the difference between the current market price of the underlying asset and the strike price of the option.
Initial Coin Offering (ICO)
A type of crowdfunding using cryptocurrencies.
Interoperability
The ability of different protocols and blockchains to work and interact with each other.
L
Limit Order
An order to buy or sell an asset at a specific price or better.
Liquidity
The degree to which an asset or market can be bought or sold without affecting its price.
Liquidity Mining
A process in which users can earn rewards by providing liquidity to a liquidity pool.
Liquidity Provider (LP)
An individual or entity that provides liquidity to a liquidity pool.
Liquidity Pool
A smart contract that holds a pool of assets used for trading or providing liquidity.
Long Call
An options trading strategy that involves buying a call option with the expectation of a rise in the price of the underlying asset.
Long Position
A position in which an investor has bought an asset with the expectation of a rise in its price.
Long Put
An options trading strategy that involves buying a put option with the expectation of a decline in the price of the underlying asset.
Layer 2
A secondary blockchain built on top of an existing blockchain network to improve scalability and efficiency while utilizing the security of the underlying blockchain.
Leverage
A key concept in finance and trading, this involves using borrowed funds or financial instruments to amplify potential profit and loss.
Liquidity Pool
A collection of funds locked in a smart contract, used to facilitate decentralized trading and lending.
M
Market Maker
An individual or entity that provides liquidity to and facilitates a market by placing bids and asks.
Market Order
An order to buy or sell an asset at the best available price in the market.
Market Price
The current price at which an asset is being traded in the market.
Market Taker
An individual or entity that facilitates a market by accepting the bids and asks of a market maker.
Mining
The process by which transactions are verified and added to a blockchain, also the means through which new units of cryptocurrency are released in proof-of-work blockchains like Bitcoin.
Multisig
Short for multi-signature, it refers to requiring more than one key to authorize a transaction.
N
Non-Fungible Token (NFT)
A type of digital asset that can represent a wide range of unique tangible and intangible items. Often used to represent positions on DeFi platforms, e.g. LPs or options.
Non-custodial
A system or service where users retain full control and ownership of their assets, without the need to rely on a third-party entity to hold or manage them.
O
Off-Chain
Transactions or activities that occur outside of a blockchain.
On-Chain
Transactions or activities that occur on a blockchain.
Option
A financial instrument that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price and time.
Option Greeks
A set of metrics used to measure an options contract's sensitivity to changes in different variables, such as the underlying asset price, volatility, and time.
Option Premium
The price paid for an options contract, which includes both intrinsic value and extrinsic value.
Option Pricing Model
A mathematical model used to calculate the theoretical price of an options contract.
Option Size
The number of underlying assets covered by an options contract.
Option Underwriter
An individual or entity that sells options contracts and collects premiums from buyers.
Oracle
A trusted source of data used to provide information to a smart contract.
Out-of-the-Money (OTM)
An options contract whose strike price is not favorable compared to the current market price of the underlying asset.
P
PnL (Profit and Loss)
The actual profit or loss realized from a trade after it has been closed.
Premia Blue
The coolest and most comprehensive decentralized exchange for trading DeFi options and earning yield.
Price Quote
The current market price at which an asset is being bought or sold.
Put Option
An options contract that gives the holder the right, but not the obligation, to sell an underlying asset at a predetermined price and time.
Peer-to-Peer (P2P)
A decentralized form of platform interaction that is conducted directly between two parties.
Proof of Stake (PoS)
A consensus mechanism where validators are chosen to create and validate new blocks based on their ownership or "stake" in the cryptocurrency, eliminating the need for extensive computational work.
Proof of Work (PoW)
A consensus mechanism where miners compete to solve complex puzzles, providing computational evidence of their work to validate and add new blocks to the blockchain.
R
Range Order
An order to buy or sell an asset within a specific price range.
Realized Volatility (Historical Volatility)
The degree of variation of an asset's price over a specific period of time.
Rho
A Greek that represents the rate at which an options contract's price changes in response to changes in the risk-free interest rate.
Rekt
A term used to describe a severe loss at trading, derived from "wrecked".
S
Selling Back To A Pool
The process of selling an asset or option back to a liquidity pool.
Settlement
The process of closing a trade and transferring assets or funds between parties.
Short Call
An options trading strategy that involves selling a call option with the expectation of a decline in the price of the underlying asset.
Short Position
A position in which an investor has sold an asset with the expectation of a decline in its price.
Short Put
An options trading strategy that involves selling a put option with the expectation of a rise in the price of the underlying asset.
Smart Contract
A self-executing contract that is programmed on a blockchain.
Strike Price
The price at which an underlying asset can be bought or sold when exercising an options contract.
Scalability
The capability of a system, network, or process (e.g. a blockchain or dApp) to handle a growing amount of work.
Staking
The act of participating in a proof-of-stake (PoS) system to help secure the network and earn rewards. Also used to describe locking tokens to earn yield or governance rights within a protocol.
Stablecoin
A type of cryptocurrency that is designed to maintain peg to a stable currency, as opposed to a volatile market price.
Satoshi
The smallest unit of Bitcoin, named after Satoshi Nakamoto, the pseudonymous creator of Bitcoin.
Sidechain
A separate blockchain that is attached to the main blockchain, they are interoperable, but each operates independently.
T
Theta
A Greek that represents the rate at which an options contract's price changes in response to changes in time.
Token Emissions
The process of creating and distributing new tokens in a cryptocurrency network.
Total Value Locked (TVL)
The total amount of assets locked in a decentralized application or protocol.
Transaction Fee
A fee that is charged by a protocol, blockchain, or broker for processing a transaction.
Trustless
A characteristic of blockchain technology where no trust is required between parties in a transaction.
Tokenomics
The study of the supply and demand characteristics of cryptocurrencies, derived from a combination of the words "token" and "economics".
U
Underlying Asset
The asset on which an options contract is based.
User Experience (UX)
The overall experience a user has while interacting with a website, application, or platform.
User Interface (UI)
The visual and interactive elements of a website, application, or platform.
V
Vega
A Greek that represents the rate at which an options contract's price changes in response to changes in volatility.
Volatility
The degree of variation of an asset's price over time.
Validator
In Proof-of-Stake (PoS) blockchains, validators are the nodes that participate in the consensus protocol, as opposed to miners in a Proof of Work (PoW) blockchain.
Volatility Index
A measure of market price volatility of a specific asset.
W
Wallet
A digital place where a user can store their cryptocurrencies.
Whitepaper
An authoritative report or guide that usually informs readers about the philosophy, objectives, and technology of a project or initiative.
Whale
An individual or organization that holds (or trades in) a large amount of a cryptocurrency.
Wrapped Tokens
Tokens from one blockchain that have been 'wrapped' into a format that can be used on a different blockchain.
Y
Yield
The return on an investment, typically expressed as a percentage of the invested amount.
Yield Farming
A practice in DeFi that involves depositing cryptocurrencies via smart contract-based protocols with the aim of generating returns.
Z
Zero-Knowledge Proof (ZKP)
A cryptographic principle that allows one party (the prover) to prove to another party (the verifier) that they know a value x, without conveying any information apart from the fact that they know the value x.