Understanding mark price and expiration price for options
What is the mark price of an option’s contract?
The mark price for options is calculated using the Black-76 model, , which incorporates the following
Mark Price of the futures contract that has the same time to maturity as the Option,
Strike Price of the option
The time to maturity of the option, measured in years .
The Implied Volatility (IV) of the underlying asset ,which is obtained from the volatility surface.
Interest Rate: Applicable risk-free rate.
This approach is used because the premiums are presented as forward premiums in the order book. The calculation does not include any discounting.
What is the expiration price of an option’s contract?
The price used upon Expiry for an Options contract is determined by using CoinDesk’s “CBTCR3HK” (30-minute TWAP of the closing minute values of BTC-USD CCIXber between 3:30 pm and 4:00 pm HKT ). This price is used to check if an option is in the money by comparing it to the option’s strike price .
Furthermore, for those in-the-money Options that expire into dated futures, the Price used upon Expiry is also used to calculate the notional value of the new dated futures position that is created.