@Schlomo You are right. But market makers would be locking the assets into Uniswap V3 and they would be selling/purchasing them from the users for a premium for short/long exposure.

A regular options corresponds to a single-tick LP position and they would be priced according to Black-Scholes.

A ranged LP with a scaling factor r>1 could also be minted+traded. That range option would decay towards the fixed DTE payoff at expiration (not the 0DTE), thereby capping gamma and altering its price compared to Black-Scholes.