Catalyzes the cyclization of the linear isoprenoid intermediate geranylgeranyl diphosphate to tricycclic cyclooctat-9-en-7-ol in the cyclooctatin biosynthesis pathway. Cyclooctatin is a potent inhibitor of lysophospholipase. geranylgeranyl diphosphate + H2O = cyclooctat-9-en-7-ol + diphosphate Binds 3 Mg(2+) ions per subunit. Homodimer. The Asp-Asp-Xaa-Xaa-Asp/Glu(DDXXD/E) motifs is important for the catalytic activity, presumably through binding to Mg(2+). 3,7,18-dolabellatriene produced by the Trp288Gly mutant has potential antibiotic activity against multidrug-resistant S.aureus (MRSA). Belongs to the terpene synthase family.