π° Demystifying Options: A 0 to 1 Guide on DeFi Options π°
Written by our very own @Moomsxxx π
Full Article Linked Belowππ
Written by our very own @Moomsxxx π
Full Article Linked Belowππ
Options are the missing piece of crypto derivatives.
We analysed the whole sector to bring you a deep dive in this narrative.
Let's start from the basics π
We analysed the whole sector to bring you a deep dive in this narrative.
Let's start from the basics π
What are Options? π‘
An options contract gives the buyer the right to buy or sellβdepending on the type of contract they holdβthe underlying asset.
Unlike futures, the holder is not required to buy or sell the asset if they decide against it π
An options contract gives the buyer the right to buy or sellβdepending on the type of contract they holdβthe underlying asset.
Unlike futures, the holder is not required to buy or sell the asset if they decide against it π
Options buyers can purchase either a call option or a put option:
π’ A call option gives the buyer the right to buy the underlying asset at a predefined strike price.
π΄ A put option gives the buyer the right to sell the underlying asset at a predefined strike price.
π’ A call option gives the buyer the right to buy the underlying asset at a predefined strike price.
π΄ A put option gives the buyer the right to sell the underlying asset at a predefined strike price.
While just starting to pick up volume in DeFi,
options are widely utilized in tradFi to:
π‘οΈHedge investments
πΈ Speculation
π Volatility trading
𧩠Combined strategies
πͺ Utilize βcheapβ leverage
options are widely utilized in tradFi to:
π‘οΈHedge investments
πΈ Speculation
π Volatility trading
𧩠Combined strategies
πͺ Utilize βcheapβ leverage
The DeFi options sector looks incredibly promising in terms of growth for the next cycle.
Options are part of the derivatives basket, arguably the product with the best product-market fit (PMF) in the crypto industry, along with gambling.
Options are part of the derivatives basket, arguably the product with the best product-market fit (PMF) in the crypto industry, along with gambling.
Currently, DeFi options protocols can be differentiated into four categories:
π Protocols utilizing an orderbook
π» Protocols utilizing an AMM
β‘ Protocols providing structured products based on options strategies
π Protocols introducing volatility products
π Protocols utilizing an orderbook
π» Protocols utilizing an AMM
β‘ Protocols providing structured products based on options strategies
π Protocols introducing volatility products
The traded notional volume of these platforms is going parabolic, with over $350m monthly volume in November, as in the @DefiLlama chart below.
However, these are ridiculous numbers compared to CEXs, which have a volume of over $40B π
However, these are ridiculous numbers compared to CEXs, which have a volume of over $40B π
Protocols covered in the article π
Orderbook-Based Protocols
β’ @aevoxyz
β’ @lyrafinance
AMMs-Based Protocols
β’ @dopex_io
β’ @PremiaFinance
β’ @ryskfinance
β’ @HegicOptions
β’ @GammaSwapLabs
β’ @Panoptic_xyz
β’ @SmileeFinance
Structured Products
β’ @ThetanutsFi
Orderbook-Based Protocols
β’ @aevoxyz
β’ @lyrafinance
AMMs-Based Protocols
β’ @dopex_io
β’ @PremiaFinance
β’ @ryskfinance
β’ @HegicOptions
β’ @GammaSwapLabs
β’ @Panoptic_xyz
β’ @SmileeFinance
Structured Products
β’ @ThetanutsFi
Protocols Overview - Table
Key takeaways about each liquidity model - Summary π
Orderbook-based Protocols π
Most protocols, including @aevoxyz, have an orderbook that only supports option minting and settlement, with trading done off-chain.
Orderbook-based Protocols π
Most protocols, including @aevoxyz, have an orderbook that only supports option minting and settlement, with trading done off-chain.
AMM-based Protocols π»
In the current market, AMM-based platforms are generally more efficient than those based on orderbooks.
But, there is a drawback for LPs as they can't choose which options to sell, and if they want to exit, they might face IL β
In the current market, AMM-based platforms are generally more efficient than those based on orderbooks.
But, there is a drawback for LPs as they can't choose which options to sell, and if they want to exit, they might face IL β
Volatility Products π
Protocols such as Gammaswap, Smilee, and Panoptic are based on AMMs but have different mechanisms.
They provide a different type of product, which is receiving good feedback from the market β
Protocols such as Gammaswap, Smilee, and Panoptic are based on AMMs but have different mechanisms.
They provide a different type of product, which is receiving good feedback from the market β
Structured product providers π§©
These protocols have demonstrated PMF as they simplify options trading for retail users who lack experience in the topic.
These protocols have demonstrated PMF as they simplify options trading for retail users who lack experience in the topic.
How to understand and evaluate options protocols?
Why are option protocols not growing at the same pace as perpetuals?
How could the sector evolve, and which projects to keep an eye on?
You can find all of the answers in our full report π
chronicle.castlecapital.vc
Why are option protocols not growing at the same pace as perpetuals?
How could the sector evolve, and which projects to keep an eye on?
You can find all of the answers in our full report π
chronicle.castlecapital.vc
Once again, hats off to our writer @Moomsxxx π
Tagging options experts who might be interested in this:
@hansolar21
@DanDeFiEd
@DK3Anon
@HackermanAce
@Slappjakke
@0xmjs
@tztokchad
@Tetranode
@stacy_muur
@CryptoGideon_
@thinkingvols
@satoshiheist
@GreeksLive
@4adybug
@veryHighLander
@guil_lambert
@cryptojesperk
@hansolar21
@DanDeFiEd
@DK3Anon
@HackermanAce
@Slappjakke
@0xmjs
@tztokchad
@Tetranode
@stacy_muur
@CryptoGideon_
@thinkingvols
@satoshiheist
@GreeksLive
@4adybug
@veryHighLander
@guil_lambert
@cryptojesperk
and our frens you should follow:
@DAdvisoor
@ReveloIntel
@TheiaResearch
@DegenSensei
@0xhuntingalpha
@TaikiMaeda2
@0xKepler
@0xPrismatic
@WinterSoldierxz
@rektdiomedes
@thedailydegenhq
@VirtualKenji
@RiceMaximalist
@CryptoMaestro
@DAdvisoor
@ReveloIntel
@TheiaResearch
@DegenSensei
@0xhuntingalpha
@TaikiMaeda2
@0xKepler
@0xPrismatic
@WinterSoldierxz
@rektdiomedes
@thedailydegenhq
@VirtualKenji
@RiceMaximalist
@CryptoMaestro
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chronicle.castlecapital.vc
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