How Volar works
Volar is an on-chain options market for tokenized equities on Robinhood Chain. Every option is fully collateralized and cash-settled, and every premium is priced by an on-chain Monte-Carlo engine. This page explains the whole mechanism, end to end.
Overview
An option is the right to a payoff that depends on the future price of an underlying asset. Volar lets anyone write (sell) or buy options on tokenized equities such as SPCX, settled in the USDG stablecoin. There is no order-matching engine to trust, no custodian holding your funds, and no liquidation engine: every open option is backed from the moment it is written to the moment it settles by collateral the writer has already locked.
Because the whole system is a set of public smart contracts, you can verify each premium, each collateral balance, and each settlement yourself.
The pricing engine
Some options have a simple closed-form price (a plain call or put under Black-Scholes). Most interesting ones do not. Volar prices everything with a Monte-Carlo engine that simulates thousands of price paths for the underlying, applies the option's payoff to each, and averages the result. Because the engine is a view function, quoting is free: it runs inside an eth_call and costs no gas.
A raw simulator is fine for a quote, but not safe for settlement, because two things can go wrong. Volar closes both:
- Seed safety. The random seed is never chosen by the caller. It is derived deterministically from the trade itself —
keccak256(version, spec)— so nobody can shop for a favorable draw. - Convergence guard. A settlement price runs two independent simulation batches and only returns a value if the two agree within a set tolerance. If they disagree, the Monte-Carlo has not converged for that contract and the call reverts instead of settling on a noisy number. This bounds the simulation error on-chain.
For vanilla legs, Volar also implements Black-Scholes in closed form (a fixed-point natural log and a rational normal CDF) as an exact anchor and as a control variate that sharpens the simulation for exotics.
Collateralization
Volar is fully collateralized: the writer of an option deposits, up front, the maximum the option could ever pay out. That deposit is the only source of the buyer's payout, so the buyer never depends on the writer's future solvency, and the writer can never be liquidated.
| Leg | Payout | Collateral locked |
|---|---|---|
| Put | max(K - S, 0) x qty | K x qty |
| Capped call | min(max(S - K, 0), cap) x qty | cap x qty |
A plain call has unbounded payoff, so it cannot be fully collateralized in cash. Volar prices calls as a call spread with a cap, which bounds both the buyer's upside and the writer's obligation — the cap is what makes a cash-settled call fully collateralizable.
Write, fill, settle
Every position moves through three permissionless steps:
- Write. The writer chooses a leg, strike, expiry and size, deposits the collateral, and the engine prices a settlement-grade premium. The offer is now open.
- Fill. A buyer pays the premium (plus a small protocol fee) and holds the long. The position is live and needs no maintenance — no margin to top up, nothing to monitor.
- Settle. At or after expiry, the option settles against the oracle price. The buyer receives the intrinsic value out of the locked collateral; the writer receives whatever remains. Anyone can trigger settlement.
Option legs
Cash-secured put
The writer locks K x qty of USDG. If the price finishes below the strike, the buyer collects the difference; otherwise the writer keeps the collateral and the premium. A put is downside protection for the buyer and a way to earn yield for the writer.
Capped call (call spread)
The writer locks cap x qty. The buyer profits as the price rises above the strike, up to the cap. This is bounded, leveraged upside exposure — fully collateralized.
Exotics
The engine already supports payoffs that no closed-form venue can price on-chain, coming to the market in a later phase:
- Barrier — a call that knocks out if the price ever touches a level. Cheaper than a vanilla call because it can expire early.
- Asian — pays on the average price over the window, which is smoother and much harder to manipulate at expiry.
- Digital — an all-or-nothing payout if the option finishes in the money. A clean binary bet.
Barrier and Asian payoffs are path-dependent — they depend on the whole price trajectory, not just the final price — which is exactly why a Monte-Carlo engine is the right tool.
Oracles
Spot price comes from the on-chain SPCX equity feed; volatility comes from the Metronome index. Volar reads them through a hardened adapter that fails closed: it rejects a non-positive price, an incomplete round, a stale round, or a single-round jump larger than a configured band, and it clamps volatility into a sane range. A manipulated or broken feed cannot mint a mispriced premium or settle a wrong payout.
Fees
The protocol charges a small fee on the premium at fill. There are no deposit, withdrawal, or settlement fees, and no hidden spread — the premium you see is the premium the engine computed. Live contract addresses are listed on the terminal homepage.