How @dopex_io is revolutionizing decentralized options trading with concentrated liquidity?
Get ready for Dopex v2, the game-changing infrastructure of DeFi. It's about to become the new standard. Are you prepared for the OpFi narrative?
Let's dive in and check it out! ๐
Disclaimer:
Kindly be advised that this thread is intended solely for the purpose of sharing information and should not be construed as financial advice.
Disclosure:
This thread was created in collaboration with @dopex_io
Prior to proceeding, we highly encourage and advise you to refer to our preceding visual guide on the fundamentals of options trading.
twitter.com/eli5_defi/status/1526020809910718464?s=20&t=-c0-wlv7JyJitSeYwkTr2g
Table of Contents
๐ What is @dopex_io v2?
๐ How LPs provide Liquidity in CLAMMs?
๐ How Trader buy Options?
๐ Purchasing Call Options
๐ Purchasing Put Options
๐ Associated Risks
๐What is Dopex v2?
Dopex v2 allows LPs to deposit in Concentrated Liquidity AMMs (CLAMMs), like @Uniswap v3, @traderjoe_xyz 's Liquidity Book, and other AMM that utilizes concentrated liquidity.
These CLAMMs provide the fundamental liquidity for option writing.
LPs (Options Writer) provide liquidity with three simple methods:
๐Provide LP (e.g., $ETH/$USD)
๐Deposit a single asset for the LP pair
๐Deposit other approved tokens (e.g., $DPX) as partial collateralization (margin position)
The liquidity will then be used in the CLAMMs based on the LPs' specified range.
The best scenario is when the CLAMMs position is at a strike price and within a narrow range, maximizing the utilization of liquidity and generating higher fees and premiums.
Purchasing options as a trader will be simpler and more effective due to increased liquidity
Acquired options contract is denoted by an ERC-1155 token, which represents semi-fungible tokens that symbolize the inherent value of options, enabling composability and tradeability
In the diagram below, we observe the trader purchasing $ETH call options with a $2000 strike price employing the Dopex v2 CLAMMs mechanism
The liquidity tied to the strike price will be withdrawn and restored to CLAMMs when the trader exercises the options or upon expiration
This method is also alike when a trader buys $ETH put options with a $1000 strike price using the Dopex v2 CLAMMs system.
If the trader is profitable, they can execute their options at any time without waiting for expiration. This is similar to the American Options style.
Nevertheless, certain risks should be taken into account.
Regarding margin position, despite the significantly higher returns in comparison to the deposited collateral, it is possible to face liquidation, and the maximum gain is limited.
Moreover, when liquidity is insufficient, traders might face constraints when exercising their options.
This is because, during the settlement process, the asset must still be converted to the base asset and subsequently deposited back into the Dopex v2 CLAMMs.
The options finance narrative is about to get a major upgrade with the upcoming @dopex_io v2.
With an improved user experience, options trading could become the most coveted instrument for trading, hedging, and building yield-based product.
To establish robust product and ecosystem, @dopex_io provide grant initiative to support developers, concepts, and endeavors aspiring to enhance the Dopex, thereby strengthening its v2 platform.
twitter.com/dopex_io/status/1684625951286501376?s=20
Shortened version of @dopex_io from @dLuxGMI is also available for reading here
twitter.com/dLuxGMI/status/1685991888040452096?s=20
Tagging @dopex_io Chads:
- @tztokchad
- @cryptobulma
- @chutoro_au
- @0xMD_
- @0x_Bella
- @witherblock
- @0xsaitama_
- @dLuxGMI
- @CorporealFeast
- @Bigbazuso_
- @CryptoGideon_
- @UtilityChad
Tagging Fellow #DeFi Educators
- @rektdiomedes
- @JiraiyaReal
- @jediblocmates
- @NickDrakon
- @crypto_linn
- @Dynamo_Patrick
- @DefiIgnas
- @0xCrypto_doctor
- @stakedqueen
- @crypthoem
- @ayyyeandy
- @Slappjakke
- @CryptoShiro_
- @DeFiMinty
- @Flowslikeosmo
- @poopmandefi
You can read the unrolled version of @dopex_io v2 thread here: typefully.com/eli5_defi/WI6vgMk