Writer Settlement and V2 Boundaries

Collective settlement freezes separate ledgers for long holders and Flat holders so neither class can consume the other’s allocation.

Final settlement

At the sleeve’s canonical settlement price:

long reserve  = sum of external claim payouts at settlement
Flat residual = accounted sleeve assets - long reserve

Long holders claim from the long-reserve ledger. Flat holders burn Flat and claim pro rata from the frozen residual ledger. These claims may occur in either order.

The program uses cumulative allocation and deterministic dust handling, so many small claims cannot extract more than the frozen class ledger.

What happens to primary premium

Primary premium remains part of the sleeve’s accounted assets through settlement. It is not assigned back to an individual writer or tied to one strike. After long liabilities are reserved, the remaining assets form the Flat residual.

Direct burns and custody cleanup

Returning a claim to canonical issuer custody and reconciling it can reduce external open interest before settlement. A user burning an ordinary token outside the accounting instruction is not enough by itself; Spread must observe and reconcile the supply change before it changes reserve or security exposure.

After settlement, a directly burned claim cannot retroactively enlarge a Flat residual from which other Flat holders may already have claimed. Any unallocated value follows the protocol’s stranded-surplus rules.

Not live in V1

The following paper ideas are deliberately not part of the current release:

• vault-funded automated buyback-and-burn;
• optimized non-proportional close baskets;
• writer-owned option liquidity funded from sleeve headroom;
• two-sided writer-vault market making.

The current policy snapshot contains reserved V2 feature flags, but V1 requires those features to remain disabled. No client should describe them as available merely because the paper analyzes them.

Secondary user-to-user swaps and Flat transfers are current concepts. They move ownership without creating primary premium or independently changing external option open interest.

Legal and market risk

Flat is a transferable residual economic claim. Its legal classification can depend on jurisdiction and distribution. These docs describe protocol accounting, not a legal conclusion or an assurance of liquidity.

Read Risk Disclosures before using a Devnet flow.