DOPEX......What is it?
Decentralized Options Exchange
Options are a game changer for Traders/investors. Options allow you to;
Hedge positions
Lower upfront costs
Cap Downside
Have “insurance”
Offer Capital Efficiency
But with all great things there is always a “Catch/Drawback”. Some examples included the assets being idle between settlement times (not being farmed for maximum efficiency) or even the lack of optionality outside of a simple Call/ Put option. If you want to learn more about options you can read here:
But simply put Options allow buyers the right, but not obligation, to buy/sell a particular asset at an agreed-upon price and date. There are two types of options: a call or a put option.
•CALL OPTION - The right, but not the obligation, to BUY an asset at a specified price before a specified expiry date
•PUT OPTION - The right, but not the obligation, to SELL an asset at a specified price before a specified expiry date
•STRIKE PRICE - The price at which a put or call option can be exercised •CONTRACT EXPIRY - The date when the options contract expires OPTION •PREMIUM - The cost of the option contract (put/call)
Enter DOPEX
Dopex was designed to maximize option liquidity, minimize losses for option writers, and maximize gains for option buyers. The main difference between Dopex and other option platforms is the assets in the contract between settlement times are not sitting idle, they are put to work. Users can be both options buyers and options sellers (guys who write contracts).
SSOV
A Feature of Dopex is the SSOV (Single Staking Option Vaults)-
These bad boys allow users to lock up tokens for a specified period of time and earn yield on their staked assets. Users will be able to deposit assets into a contract which then sells your deposits as call options to buyers at fixed strikes that they select for end-of-month expiries.
So Here’s how SSOVs work:
SSOV DEPOSITORS (OPTION SELLERS)
At the beginning of the month, strike prices are set for the month-end.
Users then lock assets into a vault and select fixed strikes that they’d like to sell calls at.
The contract then deposits the users' tokens into a single staking pool to earn farming rewards and to earn yield from premiums sold (aka options)
SSOV depositors receive yield proportionally to how close to ATM strikes are being locked in.
You can use options as take profit points
SSOV (Option Buyers)
•Similar to other option platforms, just buy and go
•Tells you break even price as well as a calculator it Will look something like this to show price points you must be at to be in profit and cover costs.
Potential Outcomes for seller (AKA Depositor):
If option is in the money or way in the money then depositors dont lose in USD value, only in asset value so if ETH terms then lose some ETH
If your deposit was 1k (1ETH at the beginning) and ETH is 2k now you would be left with .5 ETH + premiums
Potential Outcomes For the Buyer
•Contract expires out of the money (below strike price if call option/ above if put) loses premium cost
•Contract expires in the money ....in profit (chart will look like this) (strait line is no bueno but the vertical is nuts and ham)
EXAMPLE:
I deposit 10 ETH into the SSOV vault at a 2000$ strike price with ETH trading at $1570 at time of writing). The Epoch duration is from July 29th to August 26th).
If I deposit into the Vault my ETH will be locked until the end of the Epoch but a couple of scenarios can happen;
1.ETH stays below 2k. I get my 10 ETH back + premiums
2.ETH goes above 2k, I lose some of my 10 ETH but will still have my same dollar amount that I started with +premiums.
(EX: ETH Is trading at 1k and I have 10 ETH =$1000 so if goes to 2000 then I will have 5 Eth…..5x2000= 10,000$)
The point of maximum profit for the option seller (depositor) is right at the strike price. The reason being is that your assets have appreciated to the maximum price before they are sold, and you still get the premium. The reason the depositor would get all his ETH back in this case is because the buyers options will expire worthless because his option is the same as the market price.
A covered call is great for a short-term hedge on a long position and is a great way to get an additional yield. But these are not without risk so dont use this as a place to APE with your Hodl bag unless you understand what you are doing.
To recap SSOV depositors will not be at risk of losing any USD value when staking their assets. However, if the token gigga pumps then they are at risk to losing some of the deposited asset (not in dollar value). If the option expires with the buyer in the money They will get your additional assets - the premiums that were paid. You can use options as a taking profit point at the strike price and getting paid premiums to do it.
Now on the buyers side it is self explanatory as simply purchasing a traditional option. Buyers just need to select a call or put option, select desired strike price within the Epoch and select the amount of options they want to buy and pay the premium.
ATLANTICS
This is the Sauce with Dopex
•The collateral within the contract can be used to do anything (not just farm single staking) as long as it's at no loss
•The buyer can "borrow" the collateral from the selling and pay him a funding fee accrued in pro-rata till expiry
•Dopex has a list of whitelisted contracts to farm with
•Think buying a car with your credit card or renting a car ….. and using it to sell uber rides. You use it now but dont have to pay for it till later.
The main goal of Atlantic options is to increase the capital efficiency of selling options contracts. Traditionally when users want to sell options contracts, they must provide the underlying asset upfront as collateral, so these assets are sitting idle not collecting crypto dust.
If you remember in the SSOV When selling the options you deposit into the vaults and the assets sit idle between settlement. Atlantics allows the assets deposited to be put to work and earn a yield as well.
If you remember our example earlier in this article (see Screenshot)
You will basically have the same outcome except now the buyer has the opportunity to Farm with your assets and earn a yield and you as the seller are able to earn additional income from the interest they are paying to borrow your assets. Dont worry I have pretty photos to show you later in this article.
Benefits with Atlantics for the Depositor (aka seller)
Premiums
Platform emissions
Incentives or bribes
RDPX rebates on losses (in v2)
•Instead of just the farm yield, depositors also receive a funding fee
For the Buyer of Atlantics
You now purchase an option
Have the possibility to borrow the collateral to use throughout dopex whitelisted products in exchange for a funding fee
These Tweets by 0xkira explain the process
Results:
•If nothing goes wrong then buyer gets returns (from his farming/trading)
•Seller (writer) gets the premium + additional fee for collateral+ premiums
Atlantic straddles
A straddle is a neutral options strategy that involves simultaneously buying a put and a call option on the underlying with the same expiration and strike. If the market looks volatile You can buy these with USDC to profit from volatility in *either* direction.
As a Option seller and betting against volatility you can Deposit USDC as collateral (sells ATM(at the money) puts to the Straddle buyer). Since your selling ATM puts your only downside is if the price action is negative, if its positive or neutral you get your deposit back +premiums and interest. Currently like 250+% APR (no thats not a typo).
Summary:
BUYER:
•great for if you expect volatility but just dont know which direction
•As a buyer your downside is if the price action is not bullish or bearish and your downside is the cost of the Straddle
WRITER:
•You are betting against volatility and looking to profit by just depositing USDC, and payouts are high. Is 465% enough?
•These can only be long straddles because the collateral is lent to the buyer
•The downside is if the price action is Negative because your selling ATM Puts. (selling puts means you think the price is going to go up, you buy puts if you think price action is bearish)
•This can be hedged on Dopex by simply buying puts
DPX TOKEN
$RDPX Is a bit of a different animal (more of a speculation play)
•RDPX while having a no cap supply - has mechanisms in-place to avoid it from being valueless while also providing intrinsic value to the token.
•RDPX would be a fee requirement for future app layer additions to Dopex such as vaults.
•Dopex would support RDPX as collateral to borrow funds from Margin to leverage option positions.
•RDPX would be usable as collateral to mint synthetic assets, commodities etc. which could further be used to create options for synthetic non-crypto assets. (as the synth pie grows to get Dopex USD will be more demand for RDPX because its the collateral for the over collateralized stable
•Fee accrual can be boosted via staking RDPX
•Emissions are somewhat stunted as its only given out when people are at a loss
RISKS TO DOPEX
Too complex to understand (more users will just buy Doge and Shib)
Smart contract risk (using other farms to increase yield)
Not having the proper balance between options buyers and sellers.
Other option protocols take market share
There are many other features and Tools set to be rolled out on Dopex and these are just a few of them I barely into the rabbit hole and Im already lost. The team is constantly innovating and IMO is disrupting the options space/Defi as we know it. From SSOV’s to Straddles and Synths soon. Dopex is aiming at a multi-trillion dollar sector, and grabbing a fraction of the pie will be well…..sweet
Just a shoutout to this guy in the Dopex discord for taking the time to ELI5 Dopex and answer my nonstop questions 😜 …..he has the patience of a saint.
I will have more content and youtube videos that break down dopex as well as other protocols in the space. If you want more Crypto Alpha Subscribe to the channel and newsletter and Share with a friend. Also if you want to see what Im doing in the markets you can consider joining the Discord. I will have more vids and articles coming thru out the Bear 😉
-Cheers
https://www.youtube.com/c/DrakeonDigital
Dopex video