How Convallax works

Convallax is a derivatives layer for prediction markets. Each Polymarket-style market has a YES outcome whose price moves between $0 and $1 and represents the market's implied probability that the event resolves YES.

Convallax lets you trade options on that YES price: European calls and puts with a fixed strike (e.g. 50¢), a chosen expiry, and USDC collateral. You express a view on where probability will be at expiry — or hedge an existing prediction-market position — without trading the underlying outcome token directly.

The app at convallax.com/predict connects to live Polymarket markets, shows an indicative quote from our market-making engine, and settles trades on-chain on Polygon Amoy (testnet).

Every option series is tied to a specific prediction market, identified by its condition ID and the Polymarket YES CLOB token. The underlying “spot” is the current YES price S (0 to 1).

Strike is quoted in cents of probability: 5¢ through 95¢ in 5¢ steps (e.g. a 50¢ strike means the option pays off relative to whether YES finishes above or below 50% at expiry).

Expiry is a Unix timestamp. You can pick any date before the market's resolution time; aligning expiry with market resolution is supported for options that settle with the final outcome.

Payoffs are defined on the resolution price S ∈ [0, 1] at expiry (the settled YES probability in cents of $1):

• Call — payoff per contract = max(0, S −K), paid in USDC. You profit when YES finishes above the strike.
• Put — payoff per contract = max(0, K − S). You profit when YES finishes below the strike.

Premium is quoted per whole option (0–100¢ of $1 notional). A call can never cost more than its maximum possible payout (1 − K); a put can never cost more than K. Our market maker enforces that cap so quotes stay economically sensible.

In the trading UI, long means you buy options (pay premium, limited loss). Short means you sell options (receive premium, collateralized by the writer on-chain).

Each option series is an ERC-1155 token ID on Polygon. One token unit uses 6 decimals (1.000000 = one whole option). Holding tokens means you are a holder entitled to the settlement payout if the option finishes in the money.

Writers mint tokens by locking USDC collateral in Convallax Core:

• Call writer collateral per token ≈ (100% − strike) of $1 notional.
• Put writer collateral per token ≈ strike fraction of $1 notional.

When you buy from the protocol's market maker, the MM delivers tokens to your wallet in exchange for premium. When you sell, you return tokens and receive premium. After settlement, holders burn tokens and claim USDC; writers claim any collateral left after holder payouts.

The end-user flow on Predict:

1. Choose a market, strategy (e.g. breakout / above / below), strike band on the chart, expiry, and size. Long size is in USDC budget; short size is in contracts.
2. The app requests an indicative quote (bid/ask) from our pricing model — a logit-space Avellaneda–Stoikov-style quoter with defensive floors so OTM options are not given away too cheaply.
3. Click Trade and sign an EIP-712 RFQ with your wallet. That signature proves intent; it does not move funds by itself.
4. The relay returns a firm quote (price, size, side). You accept it; the market maker signs an on-chain RFQ settlement order.
5. Your wallet submits fill() on the settlement contract: USDC and option tokens move atomically in one transaction. Long buys approve USDC first if needed.

External market makers can also connect via WebSocket and compete on price; see Maker API.

After expiry, a series can be settled with a resolution price S (0–100 in basis points of $1). For fully resolved binary markets, S is 0 (NO) or 100 (YES). Convallax can also use a trade VWAP over the last 30 minutes before expiry on the Polymarket YES token when a continuous settlement is appropriate.

Settlement is authorized by an EIP-712 attestation from the protocol's resolution signer. Once settled, the contract fixes payoff per whole option and splits the series collateral between the holder pool and the writer pool.

Holders call claimHolderPayout to burn tokens and receive USDC. Writers call claimWriterCollateral for their pro-rata share of what remains.

Production test trading runs on Polygon Amoy (chain ID 80002). Connect a wallet, switch to Amoy, and open Predict.

• Use Get Free USDC in the sidebar to receive test USDC from the protocol faucet (rate-limited per address).
• You need Amoy MATIC for gas. Option series must exist on Convallax Core for your market/strike/expiry — the team registers series for supported markets.
• Indicative prices work without a separate backend; RFQ, execute, and faucet run through Convallax's hosted API routes.

This is testnet software. Contracts, parameters, and markets may change. Do not treat test balances as real value.

Additional references:

• Maker API (v1)WebSocket RFQ feed, quote schema, and relay competition rules for external market makers.