A bull bet is a tokenized, on-chain derivative that packages a bull call spread into a single mintable asset. Instead of separately buying and selling call options at different strike prices, the bull bet wraps both legs into one smart contract interaction – producing a tradeable token that represents the entire position.
Bull bets are a risk-defined strategy: both the maximum gain and maximum loss are known at the time of purchase.
Structure#
A bull bet is economically equivalent to a bull call spread – a vertical spread constructed from two call options:
| Leg | Action |
|---|---|
| Lower-strike call | Buy (synthetic) |
| Higher-strike call | Sell (synthetic) |
The spread between the two strikes defines the maximum payout. The cost to enter (the token’s market price) defines the maximum loss.
Payoff Profile#
| Metric | Value |
|---|---|
| Max profit | Strike width - cost of the bet |
| Max loss | Cost of the bet |
| Breakeven | Lower strike + cost of the bet |
| Profitable when | Underlying rises above the breakeven price |
The buyer profits most when the underlying asset finishes at or above the higher strike at expiration. If the underlying stays below the lower strike, the bet expires worthless and the buyer loses the purchase price.
Minting and Collateralization#
Bull bets are created by minters who lock collateral equal to the maximum payout (the strike width) in a smart contract. The minter receives transferable tokens representing the short side of the position. They profit by selling those tokens on the open market for more than the minting cost (collateralization fees plus gas).
Minters can exit early by buying back tokens and burning them to reclaim a prorated share of their locked collateral and fees.
Mirror Strategy#
The bearish counterpart is the bear bet, which tokenizes a bear put spread.
DeFi Context#
Bull bets illustrate one approach to packaging options strategies as tradeable on-chain tokens on Ethereum and other blockchains. Similar exposure can be constructed manually using options protocols like Lyra, Hegic, or Opyn, or approximated through liquidity pool positions – see emulating option strategies for more on that approach.