According to the official announcement, the new token — named UMAc35-0421 — expires on 30 April 2021 and has a strike price of $35. The token was created using the Expiring Multi-Party (EMP) contract deployed by the UMA project’s engineering team.
A call option token gives buyers the right, but not the obligation, to buy an asset either at a specified price (strike) or at a specified time (expiry). The new call option tokens are quoted in UMA, and can be pooled with both UMA and other ERC-20 tokens on any AMM protocol.
The company said the 1 million UMAc35–0421 call option tokens have already been minted and pooled with UMA tokens on SushiSwap. The initial pool will have $2.64 million in liquidity — with $24 million worth of UMA tokens as collateral — which will likely be removed a week before the token expiry to avoid the possibility of significant impermanent losses.
The new call option token will have several use cases for the community. Namely, UMA holders will be able to speculate on the appreciation of the token with leverage and limited downside.
“Anybody bullish UMA can obtain the right to be long 1 UMA at a price of 35 USD by paying only 5.5% of a UMA token,” the company said in a blog post.
Users can also use the tokens to earn additional income or enhance their yields. Putting UMA as collateral will enable users to mint call option tokens and sell them to earn income or provide liquidity to farm more UMA.
As there is currently no UI for minting and managing call option tokens, the UMA team offered a bounty to members of the community to create one. The first functioning UI will receive 200 UMA, or around $5,000 at press time, while the UI that mints the most call option tokens until expiry will receive 300 UMA, worth approximately $7,500.