DBOE Options Basics

DBOE Options Basics

DBOE Novel and Simple Option Design

DBOE Call option is defined as a Bull Call Spread.

· DBOE Call(K,Kc) = Call(K) – Call(Kc) with Kc > K

At expiry

· DBOE Call(K,Kc) = Max(0,Min(Kc – K, Spot – K))

DBOE Put option is defined as Bear Put Spread.

· DBOE Put(K,Kc) = Put(K) – Put(Kc) with Kc < K

At expiry

· DBOE Call(K,Kc) = Max(0,Min(K - Kc, Spot – K))

Key benefits of DBOE Options

1. Users have the flexibility to choose protection range

2. Collateral requires is capped by the distance of the two strikes i.e. K and Kc

3. Regular options can be easily constructed

4. No clearing risk