Below is a Solidity covered call smart contract. The seller deposits tokens into the contract and earns a fee selling the contract. This contract gives the purchaser the right to buy tokens if the contract conditions are met. The contract is considered “covered” because the tokens are deposited into the contract. If the contract conditions are not met then the seller can withdraw his tokens at expiration.
The example use case
Alice creates an options contract and funds the contract with the amount of tokens required in the contract. Essentially this is a covered call options contract. Bob buys the contract and can exercise the contract if it makes economic sense. If the contract is not exercised Alice can reclaim her tokens and keep the premium payed by Bob.
Follow these steps to create the scenario
- Deploy the Token contract to the blockchain
- Deploy the Covered Call smart contract as Alice to the blockchain. Make sure the Token address is used in the deployment of the Option contract
- As Alice transfer the exact amount of 100 tokens from the Token contract to the Call Options contract
- Bob to purchase the Covered Call Options contract for the exact purchase price
- Bob to execute the options contract for the exact strike price
Experiment with the contract below and learn the basics of an options contract. Deploy the contract below to the Ethereum test network using Remix. Try to add another function or change some of the parameters.
pragma solidity ^0.7.6;
//This is a simple ownership contract
contract Owned {
constructor() { owner = msg.sender; }
address payable owner;
modifier onlyOwner {
require(msg.sender == owner, "Only owner can call this function.");
_; /* jumps to code of function using this modifier */
}
}
//the contract Token inherits the Owned contract
//This contract is very basic
//Use ERC-20 standard for creating a token
contract Token is Owned {
mapping(address => uint) public balanceOf;
//use the constructor of the base class
constructor() Owned() {}
//This is an issuance function. Add to the balance you are passing into the function
//OnlyOwner modifier is used to make sure the person calling this function is the owner of the contract
function issue(address recipient, uint amount) public onlyOwner {
balanceOf[recipient] += amount;
}
//Make sure you have enough balance to send
//Decrement and increment the balance of each address
function transfer(address recipient, uint amount) public {
require(balanceOf[msg.sender] >= amount, "Insufficient balance");
balanceOf[msg.sender] -= amount;
balanceOf[recipient] += amount;
}
}
//This is a sample fully collateralized call Option. Covered Call
//Alice creates a contract and transfers 100 tokens to contract
//At any time until expiration bob can send 1 eth to the contract
//After expiration Alice can terminate the contract and reclaim her tokens
//The contract below expands on the contract above.
//It is the same but considers Bob paying Alice the premium for the contract and then the contract is live
contract CallOptionSeller is Owned {
//input bobs address
address buyer;
//Alice funds with 100 tokens
uint quantity; /* 100 */
//Bob can send in 1 ether which is the strikePrice. Lets say it is estimated at $1,000
uint strikePrice; /* 1000000000000000000 (1 ether) */
//Bob has to pay this much for the contract.
uint purchasePrice; /* 100000000000000000 (0.1 ether) */
//Expiration is the new years block number
uint expiry; /* 9577836111 (New Years) */
//indicates if the contract premium was paid
bool wasPurchased; /* refactor as expression (buyer == 0x0)? */
Token token;
constructor(uint _quantity, uint _strikePrice, uint _purchasePrice, uint _expiry, address _tokenAddress) Owned() {
quantity = _quantity;
strikePrice = _strikePrice;
purchasePrice = _purchasePrice;
expiry = _expiry;
token = Token(_tokenAddress);
wasPurchased = false; /* added for clarity, false is default value */
}
//this function allows Bob to purchase the contract and pay the premium
function purchase() public payable {
//was the contract already purchased
require(!wasPurchased, "Option already purchased");
//did Bob send in the correct amount to purchase the contract
require(msg.value == purchasePrice, "Incorrect purchase price");
//ss this Bob trying to make the purchase
buyer = msg.sender;
//set the wasPurchased bool to true
wasPurchased = true;
}
//first check that this contract is valid, then transfer out and clean up
//Bob sends ether into contract to execute a trade
//He is only going to do this if the value of the tokens is worth more then the ether
function execute() public payable {
//make sure the contract was purchased
require(wasPurchased, "Option unpurchased");
//make sure the person trying to execute the contract is Bob
require(msg.sender == buyer, "Unauthorized");
//Contract was funded by Alice
require(token.balanceOf(address(this)) == quantity, "Funding error");
//make sure the amount of eth being payed/sent is == to the strikePrice of 1 ether
require(msg.value == strikePrice, "Payment error");
//make sure the contract has not expired
require(block.timestamp < expiry, "Expired");
//If the above is true send tokens to the buyer
token.transfer(buyer, quantity);
//Clean up the contract and remove from the blockchain
selfdestruct(owner);
}
//refund and send funds back to the owner. Contract is not worth executing
//Can not refund if it was purchased and the contract has expired
function refund() public {
if(wasPurchased) {
require(block.timestamp > expiry, "Not expired");
}
token.transfer(owner, quantity);
selfdestruct(owner);
}
//contract can accept deposits
receive()
external
payable {
}
}Try it in Remix
This code is for learning and entertainment purposes only. The code has not been audited. Use at your own risk. Remember smart contracts are experimental and could contain bugs.
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