Open Auctions are a batch auction conducted on the Gnosis Auction platform to sell off options that are minted by Theta Vault.
A batch auction means that there is only one clearing price.
Using an auction allows for price discovery on-chain, to ensure the options sale process is decentralized.
Placing a bid on the auction
Claiming OTokens from Auction
Auction Process Flow
To run through how Theta Vaults would function, we use ETH Call Theta Vault as an example.
ETH Call Theta Vault holds 100 ETH from depositors. It rolls the 100 ETH into Opyn and mints 100 call options with $4000 strike, expiring next Friday.
The vault starts the option auction. The vault deposits 100 call options onto the auction, and specifies the minimum price of an option. (Premiums are denominated in underlying for calls, USDC for puts)
Auction participants participate in the auction by placing bids on-chain. They can place multiple bids and also cancel bids. Each bid consumes gas.
Auction is concluded in one hour. The vault withdraws the premiums and earns yield for the week.
If there are unsold options from the auctions, the vault withdraws the options and burns them.
Auction participants get to claim their options from the auction. If the bid is not filled, the auction participant will then get a refund of their bid amount.
Friday 8am UTC - Previous week's options expire. Settlement price is set.