All options expire at 8 a.m. UTC and settle to a 30 minute time-weighted-average-price (TWAP) of the underlying spot price in USD, i.e. ETH options settle to the ETH/USD price and BTC options to BTC/USD. All options pay out in USDC.
In the 30 minute lead up to settlement, options are marked to a linear combination of the TWAP and corresponding forward.
For example, suppose 20 minutes before settlement, the 10 minute TWAP of the ETH spot price is $1950 and the forward price is $1975. Then, the option will be marked to
Underlying Mark Price = (10/30) * 1950 + (20/30) * 1975 = $1966.67
Note: A consequence of options settling to a TWAP of spot is so called "delta decay". Due to the fact that in the 30 minutes leading up to settlement, the underlying price will be a linear combination of the average spot price and current forward, this essentially fixes some component of the underlying price. As a consequence, the option's rate of change with respect to underlying movements (its delta) will decrease. We call this delta decay.