How Hedgey Works
This is an under the hood look at Hedgeys mechanics.

There are four main network actors on Hedgey

  1. 1.
    Market creators
  2. 2.
    Option writers
  3. 3.
    Option traders
  4. 4.
    Automated Market Makers (AMMs)

How decentralized options are traded on Hedgey

Market creators are individuals or projects that create a market for decentralized options on a trading pair. They are the ones that take the initiative of creating the market. Due to the decentralized nature of Hedgey, anyone can create an options market on any pair. Once a market is created, it will exist forever so this only happens once. A market can be created for both call and put options.
Once a market has been created, Option writers write options. When an option is written it is created and added to the order book. Depending on the market that was created they can write both call and put options. When they write an option they provide the necessary collateral to cover the option. Because it is a two-sided marketplace option writers are critical to the functioning of the marketplace.
When options have been written, Option traders can buy or sell these options for premiums. They generate bids and asks for options on the traded pair that can be filled by other traders that own these options or that can be written (created) by other market participants. This can go on until the option's expiration date or until the option is exercised.
If the trading pair of the option has a matching pair on an Automated Market Maker (AMM) like Uniswap or PancakeSwap, the option can be cash closed. Cash closing makes use of the AMM's flash swap functionality. This lets anyone make use of leverage when trading options without actually needing to own the assets needed to purchase the underlying amount. In other words, traders can gain exposure to crypto amounts far exceeding their portfolio size without needing to own the amount to settle the exposure.