Exercising Options

Options purchased on Knox Finance are issued by Premia, which means they are automatically exercised upon expiry. Since they are American options, they can also be exercised manually any time before expiry.

Settlement

With Premia's design, options are settled in the underlying asset. When exercised or upon expiry, the intrinsic value of the option is paid directly to the option holder:

If at the time of exercise, the price of the underlying asset is higher than the breakeven price, the call option is considered In The Money. In this case, the user is entitled to the payoff, which is equal to the strike price of the underlying minus the spot price. This difference is calculated automatically and settled in the underlying asset (the quote token) to the option buyer.

For more information about exercising options and their settlement, consult the Premia documentation.