> For the complete documentation index, see [llms.txt](https://pokpok-1.gitbook.io/pokpok/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://pokpok-1.gitbook.io/pokpok/getting-started-game-mode/at-the-hatchery/payg-model/value-proposition.md). # Value proposition ### **Value Proposition Behind PAYG Options** **Consistent yet sustainable returns**: In this model, the potential returns are reduced; however, the risk is also reduced. This results in a lower range of payouts for the holder and is more suited for extremely uncertain markets. In a highly uncertain market, there is value for option holders to strive for lower risk, lower return strategies to yield consistent yet sustainable returns. **Capital efficiency**: Although buying options are inherently more capital efficient than outright longs and are sometimes viewed as leveraged with the credit risk being borne by the option buyer, the PAYG model further enhances an option's capital efficiency by allowing partial funding at the beginning. **Transfer of credit risk**: Instead of forking out the total premium for options, buyers will be able to partially fund the option at the start of the tenor, with the remainder of the option risk being handled by the protocol. This results in a partial shift of credit risk from the buyer to the seller. In the traditional model, the option buyer takes on the credit of the option seller, thereby taking on the risk. In the PAYG model, because the option seller relies on the option buyer to fulfil an obligation to continue paying the price of the option, some of the credit risk is shifted from the buyer to the protocol. **Real-time market feedback**: The option buyer can continually monitor the market outlook and decide the default on the option purchase. If the market swings in a wildly unfavourable direction to the option buyer's initial view, the option buyer may re-assess the position and choose to cut loss by wilfully defaulting on the option premium. Option default risks are appropriately priced via structuring models in collaboration with market makers. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://pokpok-1.gitbook.io/pokpok/getting-started-game-mode/at-the-hatchery/payg-model/value-proposition.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.