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Settlement Types: Cash vs Physical

When an option expires in-the-money, it needs to settle. There are two ways this can happen.

Quick Comparison​

Cash SettlementPhysical Settlement
What happensPay/receive the cash differenceActual asset changes hands
DeliveryNone - just USDCYou get/give the underlying
Simpler forIndex options, cryptoStock options
Margin impactPredictableNeed to handle delivery

Cash Settlement​

With cash settlement, you receive or pay the difference between the settlement price and strike. No actual asset changes hands.

Example - Long Call:

  • Strike: $100,000
  • Settlement price: $105,000
  • You receive: $5,000 (in USDC)

Example - Short Put:

  • Strike: $95,000
  • Settlement price: $90,000
  • You pay: $5,000 (in USDC)
Hypercall uses cash settlement

All options settle in USDC. You never need to worry about taking delivery of BTC or ETH - everything is handled automatically.

Physical Settlement​

With physical settlement, the actual underlying asset changes hands:

  • Call exercised: You buy the asset at strike price
  • Put exercised: You sell the asset at strike price

This is common for stock options where traders actually want the shares.

Why crypto prefers cash settlement:

  • No delivery logistics
  • Works for assets you can't easily hold (like index prices)
  • Simpler margin calculations
  • No "delivery squeeze" risk

Settlement Price​

For cash settlement, the settlement price determines the payout. On Hypercall:

  • Uses a 30-minute TWAP (time-weighted average price)
  • Ends at 08:00 UTC on expiry day
  • Resistant to last-minute manipulation

Automatic Settlement​

On Hypercall, you don't need to do anything at expiry:

  1. Trading stops at 08:00 UTC
  2. Settlement price is calculated (30-min TWAP)
  3. ITM positions automatically pay out
  4. OTM positions expire worthless
  5. Your balance updates

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