I don't think option trading not on full, liquid exchange can work well.
Selling options is shorting volatility (a bet that implied vol will be higher than realized vol), which needs to be hedged. On exchanges, hedging automatically provides collateral, ie. sold atm call option for 1 btc is perfectly hedged by a ~0.5btc long, so even at impractical 100% collateral, you only need 0.5 btc more. The total is always 1btc.
On a purely options exchange with 100% collateral, you need 1 btc + enough collateral to go long 0.5 btc on another exchange, and in the worst case, enough to go long 1 btc. That's two times more expensive and requires additional hassle.
You do not necessarily need to hedge your exposure to volatility when selling an option. This is only true for entities that trade options professionally to make money off of the changes in pricing of options. There are plenty of "non professional" reasons to trade options (for example to speculate, or to generate additional income).
In order for an options exchange to work properly, it will need to have some kind of central clearing house that guarantees each trade, and the clearing house will need to demand that the other side of the trade put up sufficient collateral (bitcoin/fiat to cover a short position being exercised).
Our platform requires the sellers to have enough margin (collateral) so that they will be able to pay the buyers at expiration.
I don't think this would be necessary to have 100% collateral for shorter term option sales. The reason for this is because even though 1
BTC is to be delivered upon expiration the net value of an option may only be .5
BTC if the price of bitcoin is twice that of the strike price. The result would be that the buyer of the option would deliver the cash to the seller's account and the cash would be used to purchase the amount of bitcoin the account is short
In Coinut, we currently provide binary options, and the payoff is 0.01 BTC. The seller does not need 100% collateral (0.01 BTC) because he will get some premium from the buyer, which can then be used as the collateral. For vanilla options, the situation is a bit different as the payoff depends on the spot price at expiration, and thus it is not determined beforehand. Again, we don't need 100% collateral (as we don't know how much it is). We liquidate the seller's positions when he is short for collateral (this is essentially a margin call).
