How Does Decentralized Options Trading Work?
In Decentralized Financial Derivatives (DeFiDe), options like calls and puts can be bought and sold in the open market like any financial instrument. Unlike liquidity pools, however, DeFiDe does require a bid / ask method for pricing. This means that market participants will be placing limit orders or filling market orders at the bid / ask, unlike how Uniswap works. However, there are some critical nuances to the way open markets work with DeFiDe that users should be aware of.
First, unlike traditional financial markets, there is no central intermediary that is matching buyers and sellers. As such, for you to purchase an option, a counterparty willing to sell you that option must exist, and vice versa. This can make DeFiDe riskier in that until a market has sufficient market participants so that there are always players on both sides, it may not be easy to fill orders. Users should be aware of such risks before entering into any contracts and confirming an order for a Hedgey product.

Holding and trading options

Once you have purchased an option, it will not be up for sale immediately. You will simply hold it. You can, however, place it for sale by setting an ‘ask’ for the option. If another participant agrees to your ask and purchases that open option, you will no longer own that option nor the right it gives you. However, you will receive the buyer's premium price — so you can buy and sell options just like any other asset and earn profits from buying at one price and selling at another. Option Writers can also buy back their open obligations assuming they have found an initial buyer — however, again, they must find someone willing to write that option. When you buy back your obligation, you will pay the new writer the premium they demand, taking on the option writer's liability.