It works by splitting an asset into different options and creating a prediction market for them, so that they can be priced and traded. This results in options markets that are cheaper, more liquid, and more scalable.
Charm Options is unique because:
Options are priced purely by supply and demand and don't rely on Black-Scholes or an approximation formula. This means price discovery can occur naturally and options are cheaper.
All option markets for a given underlying and expiry are combined into a single pool, which means trading activity in one market will benefit all the other markets. This means Charm's option markets can support bigger trades and are therefore more liquid.
A single pool of options also means that liquidity is not fragmented across multiple markets. This means more options markets can be provided for any given amount of liquidity.
In summary, Charm has invented a new type of capital efficient AMM that can provide a number of unique benefits.
These benefits are described in the next page.