DBOE Options Basics

DBOE Options Basics

DBOE Novel and Simple Option Design

DBOE Call option is defined as a Bull Call Spread.

ยท DBOE Call(K,Kc) = Call(K) โ€“ Call(Kc) with Kc > K

At expiry

ยท DBOE Call(K,Kc) = Max(0,Min(Kc โ€“ K, Spot โ€“ K))

DBOE Put option is defined as Bear Put Spread.

ยท DBOE Put(K,Kc) = Put(K) โ€“ Put(Kc) with Kc < K

At expiry

ยท DBOE Call(K,Kc) = Max(0,Min(K - Kc, Spot โ€“ 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

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