On Friday, September 24th, we had a Telegram AMA. The following shows a recap of the questions with 0xAlpha’s inspiring answers.
0xAlpha: hello~ my Deri fellows. AMA time again. A lot of amazing things took place during the past two weeks. For example, our Everlasting Option trading volume (in terms of notional) just surpassed 100,000,000$ yesterday. That’s a major milestone for all of us!
Also our Open Zone is getting more and more popular. Quite a number of projects came to us to launch their own trading pools of perpetual futures on Deri Protocol. That’s great growth of Deri community.
For the coming several weeks, a lot of things will happen. Please stay tuned and enjoy!
OK, let me start to address the questions now.
Q1: When Deri online exchanges? Mxc、Gate 、HuoBi、Okex or Binance?
A1: It will take place. Please stay tuned.
Q2: Is there any risk of loss of principal for BUSD pledged in options and futures?
A2: The liquidity mining with Deri is NOT riks-free. Please refer to this FAQ:https://docs.deri.finance/mining-faq#is-the-liquidity-mining-on-deri-pools-risk-free
That being said, I myself participated in the liquidity mining of the Perpetual Futures pool since its kick-off. My current PnL of BUSD is positive.
While there is fluctuation of PnL of base token, LPs would need to be a bit patient and give the pool some time.
Q3: Hi! I’ve reviewed everything and the project is looking good! I’ve got two more questions I’m hoping you can help with: 1) It appears that the value of an option is about $665 ATM. If the value of the underlying asset goes up by ‘x’ then the price of the option will increase linearly to roughly $665 + ‘x’ correct?
A3: Good question. Short answer is NO.
The rate of change of the option value with respect to change in the underlying asset’s price is called Delta. you can refer to the following Wikipedia page for more details about Delta:
For ATM option, Delta does not equal to1. Actually, it’s close to 0.5. So in your case, roughly the option would increase to $665+x*0.5.
Q4: Is it possible to calculate the funding rate based on the underlying asset’s price? I can easily see the option’s price in the chart but not the funding rate…
A4: The actual funding rate is determined by the mark - payoff. while the mark price is a result of trading (based on the DPMM algorithm), you can roughly get the mark by calculating the theoretical price of the option (please refer to our whitepaper for that). the mark price should not be too off from the theoretical price, then you can get a rough idea about the funding rate.
Q5: finally I’m starting to understand it completely. LPs earn transaction fees, rewards and parts of the liquidation, and receive only the funding fees from the overhang while taking the other side of the overhang. Means, the smaller the overhang, the smaller my risk, even if I then earn no or less funding fees. But the rest of the fees and rewards remain. Wouldn’t it be clearer for LPs in terms of UX if you showed what’s the percentage of the overhang in relation to the total liquidity pool? So whether the current risk exposure (overhang) is only, for example, 1% of the LP or, for example, 50%. The exposure can of course become larger or smaller depending on the market price movement. But since the LPs share the risk of the overhang, that would be an important parameter. At least for those who do not want to take a directional position … even if this KPI is of course constantly changing. I mean ‘ok’ everyone could have a look into the contract details and calculate the risk for themselves by looking up the value of one contract, multiplying it by the number of net position, and dividing it by total liquidity, correct? (delta not taken into accoun) But again, wouldn’t this percentage, or at least the dollar equivalent of the net position, be more meaningful for the user than the number of contracts?
A5: I see your point. I think you are absolutely right that there should be a measure for the LP to easily figure out the risk he/she is bearing for his/her liquidity contribution.
However, I am not sure if the “percentage” you were talking about can serve for this purpose. If the percentage is NotionValueOfNetPosition / Pool Liquidity, I don’t see how LP can easily figure the risk from this number, can they?
You have a good point that we should provide some measures to make the risk more transparent to LPs. I will think about this. Meanwhile please share with me whatever idea you have. The “percentage” is a great inspiring idea but I think there should be a better one.
Q6: To attract new investors only DERIstake or DERI-BNB. Are you considering increasing mining rewards? 15% annual deri bounty seems too low
A6: I think the current APY seems to be fine. It attracts a sufficient amount of TVL for the trading pools that work for the current trading volume — that is how the team thinks about the APY. We surely will grow to a larger trading volume, which definitely needs pools of bigger TVL. but I think by then the price of DERI will be different accordingly. These variables will achieve a dynamic balance presumably.
Q7: Simple question — when buying a call can I ever lose more than the price I paid? (ignoring the daily funding fee). so, a call for BTCUSD-50000 right now costs $26. If I bought and BTC went way down (say $40000) then the value of my option might drop to $0. As long as I have collateral I would continue to pay the funding fee but other than than I would lose a max of $26 correct?
just bought 1 BTCUSD-50000-C and my entry price was $27.70. My margin held is $3000. If BTC suddenly drops do I lose $27.70 or $27.70 + $3000??
A7: No you can never lose more than price you at which you enter the position (technically you didn’t pay that price. this is kind of like trading futures, you enter at some price and get out at another price and you make profit/loss for the difference. But you don’t really pay the entry price).
And you question is associated with an important feature of option. Let’s take the Call option as example. When BTC is 45000, you enter a 50000-Call at a price, say 50. The max amount you can lose for that call option position is 50. You will NEVER lose more than 50. However, your upside is unlimited. If BTC goes to 100,000, you earn 50000.
This is the example I was talking about in the previous answer.
In this particular example, the max you could lose (say if BTC goes to 0) is 27.70. No more than that.
Margin is just for collateral.
Q8: What deri won mvb3??
A8: Why is that even a question?😎 You should be asking the opposite should Deri have not. Well, per the English grammar, the word “should” indicates the opposite😄
Q9: Hi I am totally lost with options trading via Deri. So I made a trade but unfortunately, my balance is still the same after closing the transaction. Is there a chance, where I can exactly see what I have invested and for what amount I got settled? Via trade history, I only see my closing position with an Option Value of >5k. So how on earth can I dive into my trade to understand the implications (which was the reason for trading in the first place)
A9: Well sorry some info is missed here I cannot really help out. could you provide more details about your trades to the team so that our colleagues can help you.
Basically if you enter and close your position too quickly, and there is no big change during your holding period, then it’s totally possible that there is no significant change in your balance, especailly if your position is small.
Q10: Is the idea to evolve to a DeFi platform? With Pools and Farms?
A10: Deri Protocol is a platform based on pools and liquidity farming. This is how it works currently.
Q11: Where can I stake DERI? I mean DERI pool, not liquidity!
A11: There are DERI-based trading pool in our Inno Zone. you can stake your DERI there.
Q12: In the bsc network only deri stake apy %19 Don’t you think this is too low?
A12: Well it is a free market. Those who already provided liquidity in these pools are obviously comfortable with the currently APY.😄
That being said, we are constantly studying what’s the best APY algorithm to better boost our trading activities. You are more than welcome to share yours with us.
Q13: Do team members still have any incentive to work on Deri after donate most of their token?
A13: haha, thank you for caring about the team. Please note that the whole team did not donate our whole stakes. What happened was the operation team (part of the whole team) donated most of their tokens. This is because the opration team thinks a more decentralized and community-driven option can better boost the development of Deri.
Q14: when we have 40000 call ?
A14: The team is constantly reviewing the market and evaluating the demands on all strikes. The thing is, the demands are usually larger for the near OTM call/put. 40000-Call is currently ITM so it’s not with a high demand yet. It will be provided when the timing is proper.
(Deep ITM options behave quite similarly to futures. For the current BTC price, 40000-CALL is largely similar to the perpetual futures. So you can really trade the perpetual futures instead.)
Q15: Are you supporting Wallet Connect?
A15: We have not yet explicitly support the Wallet Connect protocol. However, a lot of wallets developed under the Wallet Connect protocol work perfectly fine with Deri Protocol. So you might just wanna try it out with your wallet. Most likely it would just work. Please let us know if it doesn’t.
Q16: How much communication have the devs had with MVB3 team ?
A16: We are talking to them.
Q17: Hi; I have been reading up on your everlasting options contracts and am trying to understand more about the pricing of them.I have opened a btc 50k put as a test, and have been looking through the smart contracts related to this option. I came across the EverlastingOptionPricing contract (0xE3b744B8a511aeFd15535293166Ac4e065C8EB7b) , and I am trying to use the getEverlastingTimeValue function under the read contract functions. So far I have got S, K and V variables working, but for T I am unsure of what int256 to enter? Is this variable the time interval for how many times funding is paid per day, or is it something else, and what value do I enter here to get the correct timevalue for the 50k put contract?
A17: haha obviously you took close look into our code. and you are very welcome to do that. For your question, T is the funding period, which is one day per our current setting. Please read the pricing section of our whitepaper. It clearly explained what the parameter T is.
Q18: Hi, in the medium article by Deri Protocol ( https://deri-protocol.medium.com/pricing-continuously-funded-everlasting-options-acf609a06937 ), it is mentioned that at the same strike a call and put
have the same time value. Does this mean that the BTC 50k put and call would have the same daily funding rate? Thanks
A18: Theoretically they should have the same daily funding rate. but in reality, the funding is eventually determined by the mark price, which is affected by the trading positions, so not necessarily equal to the theoretical price. So in practice, they don’t necessarily have the same funding rate.
But in special cases, say the net positions of these two are both 0, they would have the same funding rate.
Q19: Is redesigning the website and interface part of the plan?
A19: Yes, we are working on that. Meanwhile, please shoot whatever advice you have to us.