> For the complete documentation index, see [llms.txt](https://docs.kyte.sh/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.kyte.sh/getting-started/concepts.md).

# Core concepts

Calls and puts, totals, expiry, the Option NFT, epochs and WETH.

{% hint style="success" %}
**In short.** Strike and premium are **totals** in WETH for the whole lot. Every offer has an **expiry** (1 hour to 90 days) and a **fill deadline** no later than expiry. A filled option is an **ERC-721 NFT**: whoever holds it can exercise. Fees are split once per 24-hour **epoch**.
{% endhint %}

## Calls and puts

|                    | Covered call                                       | Cash-secured put                                        |
| ------------------ | -------------------------------------------------- | ------------------------------------------------------- |
| Seller locks       | `amount` of the token                              | `strike` in WETH (sent as ETH, wrapped by the Router)   |
| Buyer's right      | Pay `strike`, receive `amount` tokens              | Deliver `amount` tokens, receive `strike`               |
| Buyer profits when | Token price per unit > strike per unit (+ premium) | Token price per unit < strike per unit (− premium)      |
| Seller gives up    | Upside above the strike                            | Must buy tokens at the strike even if they keep falling |

<figure><img src="https://996751035-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FVsnNtaBRxeClOSpEHWrf%2Fuploads%2Fgit-blob-0b06176b3e078062e98f89beb5d81c967f5fffbb%2Fdiagram-payoff.png?alt=media" alt="Profit and loss of a covered call and a cash-secured put when exercised, for the holder and the seller"><figcaption><p>What each side makes or loses when the option is exercised</p></figcaption></figure>

**Break-even** is where the holder gets the premium back: strike per token + premium per token for a call, strike per token − premium per token for a put.

## Totals, not per-unit prices

On-chain, **`strike` and `premium` are totals for the whole lot**, in WETH. The website asks you for a *strike per token* and multiplies by the amount, so you never have to think in totals. Storing totals means token decimals can never cause per-unit rounding.

Example: 1,000 tokens at a strike of 0.002 ETH each is stored as `amount = 1000 × 10^decimals` (the token's base units) and `strike = 2 ETH` (`2 × 10^18` wei of WETH).

## Expiry and fill deadline

Each offer has two times:

* **Expiry**: the moment the option stops being exercisable. It must be between **1 hour** and **90 days** away.
* **Fill deadline** (offer deadline): the last moment a buyer can fill the offer. It must be in the future and **no later than expiry**. After it passes, the seller can reclaim the collateral of an unfilled offer.

Exercise requires `now < expiry`. Expire requires `now ≥ expiry`. There is no moment when both or neither are possible.

## Option NFT

Every filled option is an ERC-721 token (**OptionNFT**). Whoever holds the NFT holds the option: you can transfer it or sell it elsewhere, and the new holder can exercise. The NFT is burned on exercise or expiry. Its artwork and metadata (`tokenURI`) are generated fully on-chain as SVG.

Token ids encode the market: `id = (tag << 248) | localId`.

| Tag | Market   |
| --- | -------- |
| 1   | v1 calls |
| 2   | v1 puts  |
| 3   | v2 calls |
| 4   | v2 puts  |

## Epochs

Time is divided into **epochs of 24 hours**, aligned to 00:00 UTC (`epoch = block.timestamp / 86400`). Fees are split once per epoch, and new stake becomes active at the start of the next epoch.

## ETH and WETH

The markets hold and pay **WETH** internally. A stateless **Router** lets you pay with plain ETH: it wraps exactly what's needed, calls the market for you, refunds any excess in the same transaction, and never holds a balance.


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