It's time to learn the Real Yield Greek Alphabet as it's spilling out of the options world
Delta Neutral?
Gamma neutral?
Theta vaults?
Let's become greek culture enjoyoors together 🧵👇
Delta Neutral?
Gamma neutral?
Theta vaults?
Let's become greek culture enjoyoors together 🧵👇
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Option analysts have several mathematical processes to measure the movement of an option price relative to the change in both time and the underlying stock price, plus volatility. They have been assigned a letter in the Greek alphabet, and are referred to as the Greeks.
Option analysts have several mathematical processes to measure the movement of an option price relative to the change in both time and the underlying stock price, plus volatility. They have been assigned a letter in the Greek alphabet, and are referred to as the Greeks.
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Now we hear the greek letters constantly in the real yield narrative
Delta Neutral?
Gamma neutral?
Theta decay?
But what does it REALLY mean for the real yield enjoyooors?
Now we hear the greek letters constantly in the real yield narrative
Delta Neutral?
Gamma neutral?
Theta decay?
But what does it REALLY mean for the real yield enjoyooors?
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1️⃣ Delta Δ
Delta measures of how much an option’s price will change relative to the price of the underlying asset.
Explained simply:
If the price of the underlying asset increases by $1, the price of the option will change by Delta (Δ)
1️⃣ Delta Δ
Delta measures of how much an option’s price will change relative to the price of the underlying asset.
Explained simply:
If the price of the underlying asset increases by $1, the price of the option will change by Delta (Δ)
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✅Delta Neutral
Delta Neutral Vaults is a name used for real yield vaults that farm directional yield farms, but hedge the exposure of the underlying assets, making it non-directional
Explained simply: no matter how much the price changes, your value stays the same
✅Delta Neutral
Delta Neutral Vaults is a name used for real yield vaults that farm directional yield farms, but hedge the exposure of the underlying assets, making it non-directional
Explained simply: no matter how much the price changes, your value stays the same
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E.g. @UmamiFinance $GLP vaults where the depositor deposits USDC but is exposed to ETH and BTC price fluctuations, so the protocol hedges this exposure (e.g. via perp shorts) so the user isn't affected even though ETH or BTC price changes
E.g. @UmamiFinance $GLP vaults where the depositor deposits USDC but is exposed to ETH and BTC price fluctuations, so the protocol hedges this exposure (e.g. via perp shorts) so the user isn't affected even though ETH or BTC price changes
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2️⃣ Gamma Γ
A measure of how much an option’s Delta will change when the price of the underlying security changes.
Explained simply:
What happens to your delta if the underlying asset goes up or down by $1
2️⃣ Gamma Γ
A measure of how much an option’s Delta will change when the price of the underlying security changes.
Explained simply:
What happens to your delta if the underlying asset goes up or down by $1
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Gamma is helpful for determining whether an option’s Delta will increase or decrease for moves greater than $1 in the underlying and by how much.
Proper risk management analyzes gamma, it's the Options quant gigabrains secret weapon
But how is it used in Real Yield?
Gamma is helpful for determining whether an option’s Delta will increase or decrease for moves greater than $1 in the underlying and by how much.
Proper risk management analyzes gamma, it's the Options quant gigabrains secret weapon
But how is it used in Real Yield?
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✅ Gamma Neutral Vaults
A GN Vault could get its yield by lending to a Delta Neutral Vault, letting them take the Delta risk. If done intra-protocol this can be liquidation free
The @DAOJonesOptions $jUSD GN vault lends it's assets to the $jGLP DN vault to earn yield
✅ Gamma Neutral Vaults
A GN Vault could get its yield by lending to a Delta Neutral Vault, letting them take the Delta risk. If done intra-protocol this can be liquidation free
The @DAOJonesOptions $jUSD GN vault lends it's assets to the $jGLP DN vault to earn yield
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Delta Neutral vaults can be skewed by changes in the underlying exposure, coupled with sudden price movements, and occur losses because they cannot stay Delta Neutral the entire time.
Explained brilliantly by @FroyoFren in the thread below
Delta Neutral vaults can be skewed by changes in the underlying exposure, coupled with sudden price movements, and occur losses because they cannot stay Delta Neutral the entire time.
Explained brilliantly by @FroyoFren in the thread below
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3️⃣ Vega ν
A measure of how much an option’s price will change relative to a change in the volatility of the underlying security.
Explained s̶i̶m̶p̶l̶y̶:
Vega measures the amount of increase or decrease in an option price based on a 1% change in implied volatility
3️⃣ Vega ν
A measure of how much an option’s price will change relative to a change in the volatility of the underlying security.
Explained s̶i̶m̶p̶l̶y̶:
Vega measures the amount of increase or decrease in an option price based on a 1% change in implied volatility
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✅ Longing volatility
There are multiple protocols building out defi protocols for longing volatility. One of the is @official_CVI Crypto Volatility Index. Although it cannot be described as real yield.
✅ Longing volatility
There are multiple protocols building out defi protocols for longing volatility. One of the is @official_CVI Crypto Volatility Index. Although it cannot be described as real yield.
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@GammaSwapLabs and @Panoptic_xyz are options protocols built based on a thesis that a Uniswap v3 position is like selling volatility in a tokenized short put. By borrowing a Uni v3 position you are longing volatility.
@GammaSwapLabs and @Panoptic_xyz are options protocols built based on a thesis that a Uniswap v3 position is like selling volatility in a tokenized short put. By borrowing a Uni v3 position you are longing volatility.
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My guess is that these tokenized posisitions can be hedged in vaults to earn yield on volatility
Building Vega neutral vaults, earning yield on volatility directly is not very common in defi, but implicitly most Delta Neutral vaults already earn fees from that volatility
My guess is that these tokenized posisitions can be hedged in vaults to earn yield on volatility
Building Vega neutral vaults, earning yield on volatility directly is not very common in defi, but implicitly most Delta Neutral vaults already earn fees from that volatility
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4️⃣ Theta θ
A measure of how much an option’s price will change relative to time (i.e. as it gets closer to its expiration).
Explained simply:
As the expiry of an Option gets closer, the value of the option will decay exponentially
4️⃣ Theta θ
A measure of how much an option’s price will change relative to time (i.e. as it gets closer to its expiration).
Explained simply:
As the expiry of an Option gets closer, the value of the option will decay exponentially
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✅ Theta Decay
What if you could earn yield because someones Theta is decaying? When people bet on volatility they are short on Theta, they need the volatility to come as soon as possible.
You can take the opposite side of that bet with the Theta Vault by @official_CVI
✅ Theta Decay
What if you could earn yield because someones Theta is decaying? When people bet on volatility they are short on Theta, they need the volatility to come as soon as possible.
You can take the opposite side of that bet with the Theta Vault by @official_CVI
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For more details check out my thread on @official_CVI and Theta vaults below
For more details check out my thread on @official_CVI and Theta vaults below
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✅ Decentralized Options Vaults (DOV)
A DOV like @LyraFinance generates real yield by collecting option premiums by offering AMM liquidity for selling options, and hedging the exposure to underlying assets on perps. Becoming close to Delta Neutral AND earning on Theta decay
✅ Decentralized Options Vaults (DOV)
A DOV like @LyraFinance generates real yield by collecting option premiums by offering AMM liquidity for selling options, and hedging the exposure to underlying assets on perps. Becoming close to Delta Neutral AND earning on Theta decay
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Check out my thread on Lyra Options Vaults below
Check out my thread on Lyra Options Vaults below
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5️⃣ Rho ρ
A measure of how much an option’s price will change relative to changes in interest rates.
Explained simply:
If interest rates move by 1 % rho measures how much that would change option pricing
5️⃣ Rho ρ
A measure of how much an option’s price will change relative to changes in interest rates.
Explained simply:
If interest rates move by 1 % rho measures how much that would change option pricing
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✅ Defi interest rates
Defi interest rates have been proven to be much faster to adapt so market changes than tradfi interest rates, which requires human intervention and changes often happens months after the market have changed
@voltz_xyz had a great thread about this
✅ Defi interest rates
Defi interest rates have been proven to be much faster to adapt so market changes than tradfi interest rates, which requires human intervention and changes often happens months after the market have changed
@voltz_xyz had a great thread about this
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@voltz_xyz is an AMM for selling Interests rate swaps. It's still in alpha, but i'm sure that there will be protocols creating a vault for earning real yield on arbitraging interest rates.
This is something to look out for in the future, although i think yields will be low
@voltz_xyz is an AMM for selling Interests rate swaps. It's still in alpha, but i'm sure that there will be protocols creating a vault for earning real yield on arbitraging interest rates.
This is something to look out for in the future, although i think yields will be low
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I hope you've found this thread helpful.
Follow me @Slappjakke for more alpha and let's become gigabrains together
Like/Retweet the first tweet below if you can:
I hope you've found this thread helpful.
Follow me @Slappjakke for more alpha and let's become gigabrains together
Like/Retweet the first tweet below if you can:
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