Keeper Fees (Options)

Options on HyperQuote use a keeper-incentivized settlement mechanism. When an option expires in-the-money (ITM), anyone can call the settle() function on the OptionsEngine contract to execute physical settlement. The keeper who performs this action earns a fee from the settlement proceeds as compensation for gas costs and the service of triggering timely settlement.

Keeper Fee Formula

The keeper fee is calculated as:


keeperFee = min(notional * keeperBps / 10000, maxKeeperFee)

Where:

Parameter	Description	Default
`keeperBps`	Basis points charged on the notional settlement value	10 bps (0.10%)
`maxKeeperFee`	Absolute cap on the keeper fee in collateral token units	Configurable by admin
`notional`	The settlement value of the ITM option at expiry	Computed from oracle price

The min() function ensures the keeper fee never exceeds maxKeeperFee, regardless of how large the notional value is. This protects large position holders from disproportionate fees.

Worked Example

A covered call on HYPE with strike $20 expires when the oracle publishes a settlement price of $25.


intrinsicValue = $25 - $20 = $5 per HYPE
positionSize   = 1,000 HYPE
notional       = 1,000 * $5 = $5,000

keeperBps      = 10
maxKeeperFee   = $50 (in USDC terms)

keeperFee      = min(5000 * 10 / 10000, 50)
               = min(5.00, 50)
               = $5.00

The keeper receives $5.00 from the settlement proceeds. The remaining $4,995.00 is distributed according to the settlement logic (transferred to the long position holder).

Large Position Example

If the same option had a notional of $500,000:


keeperFee = min(500000 * 10 / 10000, 50)
          = min(50.00, 50)
          = $50.00

The maxKeeperFee cap limits the fee to $50.00, even though 10 bps of $500,000 would be $50.00 (which happens to equal the cap in this example). For larger notionals, the cap becomes binding.

Who Pays the Keeper Fee

The keeper fee is deducted from the settlement payout of the ITM option. The fee reduces the amount received by the party entitled to the intrinsic value at expiry.

For a covered call that expires ITM, the call buyer (maker in V1) receives the intrinsic value minus the keeper fee.
For a cash-secured put that expires ITM, the put buyer (maker in V1) receives the settlement payout minus the keeper fee.

The keeper fee is only charged on ITM settlement. Options that expire out-of-the-money (OTM) do not trigger settlement, and no keeper fee is charged. Collateral is simply returned to the seller.

Keeper Incentive Design

The keeper mechanism is designed to ensure timely settlement without requiring any centralized operator:

Permissionless — Anyone can call settle(). There is no whitelisted keeper set.
Competitive — Multiple keepers may race to settle profitable positions. The first successful transaction wins the fee.
Self-sustaining — The fee covers gas costs and provides profit, incentivizing keepers to monitor expiring positions.
Time-bounded — Options have a 24-hour settlement window after expiry (08:00 UTC). If no keeper settles within this window, the option expires and collateral is returned.

If no keeper settles an ITM option within the settlement window, the option holder loses the intrinsic value. The keeper incentive is designed to make this extremely unlikely, since the fee provides clear economic motivation to settle profitable positions.

Admin Configurability

The keeper fee parameters are configurable by the contract admin:

Parameter	Range	Admin Action
`keeperBps`	0 — 50 bps	Can be adjusted via `setKeeperBps()`
`maxKeeperFee`	Any uint256	Can be adjusted via `setMaxKeeperFee()`

The maximum allowed value for keeperBps is 50 bps (0.50%), enforced by the contract. This hard cap prevents the admin from setting an unreasonably high keeper fee percentage.

Changes to keeper fee parameters apply to all future settlements. Previously settled options are unaffected.

Impact on Option Pricing

Makers (option buyers in V1) should factor the potential keeper fee into their premium pricing:

For deep ITM outcomes, the keeper fee is a known cost that reduces the effective payout.
For near-ATM outcomes, the keeper fee may represent a larger percentage of the small intrinsic value.
The maxKeeperFee cap makes the fee predictable for large positions.

A maker pricing a $2.00 premium on a put should consider that if the put expires ITM with $100 in intrinsic value, the keeper will take $0.10 (10 bps), leaving $99.90 net. This is a negligible cost for most positions but becomes more meaningful for small intrinsic values near the strike.

Fee Structure — Overview of all protocol fees
Settlement & Expiry — Full settlement lifecycle
Maker Fees — How makers account for fees in pricing