DeFi & Options
DOPEX SSOV V3
Everything you need to know about Dopex' main product “SSOV”
SSOV V3 has been long-awaited and we’re happy to say that it's live now!
SSOV V3 is an extension of our well-known product SSOV (Single Staking Option Vaults). V3 adds some key improvements to our vaults that give extra tools for users to interact with. You will find below more details on these changes and how they will alter your option strategies and decisions moving forward.
NEW USERS Do not worry anon! We know that options have a steep learning curve without even mentioning all the extra utilities and tools Dopex is implementing. We will be working as hard as we can to have the most digestible and easy-to-understand content ready for you to learn. Here's a short recap of some of the terms you'll need to know:
American Options/European Options
An option is a contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date.
Dopex uses a version known as European Options.
A European option is a version of options that limits execution till its expiration date. In other words, if the underlying such as ETH has moved in price, an investor would not be able to exercise the option early and take delivery of or sell the Assets.
European Options also have a lower risk since the expiration date is fixed and the loss or profit can be estimated. American options have a higher risk since the option holder of an American option has the right to exercise the Option at any time he or she finds it profitable
European Options are typically less expensive than American-style options because the seller of a European-style option is assuming less risk.
A call option gives you the right, but not the requirement, to purchase an Asset at a specific price (known as the strike price) by a specific date, at the option expiration. For this right, the call buyer will pay an amount of money called a premium which the call seller will receive.
In European Options, the assets are locked and settle automatically at expiration. That means that if your options are ITM (In The Money) you are obligated to purchase/sell.
A put option is a contract that gives its holder the right to sell a set number of Assets at a defined strike price, before a certain expiration date. For this right, the put buyer will pay an amount of money called a premium, which the put seller will receive. In European Options, the assets are locked and settle automatically at expiration. That means that if your options are ITM (In The Money) you are obligated to purchase/sell.
Dopex' Main Product “SSOVs”
S - Single
S - Staking
O - Option
V - Vaults
What are SSOVs?
They’re vaults found on the dopex.io website built on top of the Arbitrum L2 chain and they’re used to sell calls and puts. To deposit into a vault, you choose to sell a call or a put at your desired strike price with the vault locking your tokens till the end of the epoch (e.g. 1 month, week etc.)While locked, the tokens are deposited in different AMM sources earning yield while also waiting to be bought out giving you a premium from the call/ put buyers when they sell.
The premium gets compounded on top of your existing assets for extra yield. Once the epoch is over, your sold calls automatically settle without the need for intervention using a 30-minute TWAP
In simpler words:
1- User deposits token @ chosen strike
2- Tokens are deposited to earn a yield
3- Call buyers pay you a premium
4- Premium is deposited to earn a yield
5- If the epoch ends below your strike, the contract expires worthless. If not then you pay the amount over the strike to the buyer.
6- Receive your tokens + yields + premium + rebates from losses if applicable.
NEW SSOV V3 VAULTS
SSOV V3 brings some key improvements to our well-known vaults. These improvements fix some of the negatives that some users dislike about European Options. They make the vaults more accessible, flexible, and open for external product integration.
The first improvement is something that will alter the way you go about your option decisions and strategies. SSOV V3 allows you to have flexible deposits meaning you can sell a call by depositing the underlying Asset inside the vault at ANY TIME during the epoch. This is a big game-changer because liquidity for option buyers can be deposited at any time, giving options buyers more room to choose their buy/time targets.
For those of you that want to know, vault deposits are calculated following a formula depending on the time of deposit, strike price, the number of purchases after deposit, and the amount deposited.
SSOV V3 will now give more flexible expiration dates (E.g. days, weeks, months, quarters, annual, etc) These flexible dates will cater to the consumer's needs allowing for more liquid timeframes, making the vaults more attractive than ever.
Tokenized deposits will give access to many future implementations. Tokenized deposits are basically a tokenized version of your position inside a vault. Once your position is deposited, Dopex mints a receipt of your deposit that is given to you. That receipt can be used for many use cases (E.g. lending, borrowing against, and most importantly OTC swapping)
Why OTC most importantly? Right now, the only bother left for our European Options style vault would be that deposits aren’t liquid if you need urgent access to your capital. Dopex long-term vision is to have the biggest options trading volume in decentralised finance effectively creating a ginormous OTC trading order book, thus making European options liquid (Like American Options but with the positives of European). The integration of European Options into blockchain technology is revolutionary, allowing innovations such as Atlantic Options to be born.
This could easily become the de facto way to use options in the future of decentralised finance and we are very happy to be the ones to lead the way forward towards the promised lands
What new uses do you have as an option writer?
Now more than ever, timing the market matters.Let’s take for example Eth’s latest crash, usually because of the deposit period constraint, as a call seller, you would have had no choice but to deposit within the period that the vaults open.If Eth crashed to 2300$ and you deposited in the strike of 2200$. If at the moment the vault closed all your calls would have been purchased right away, it would have given you a premium of - intrinsic value (2300-2200)=100 + time value + volatility.
But now with V3, you could hold off before selling your calls if you believe Eth will bounce back. For the sake of this scenario let’s say you are right, and Eth bounces back to 2800$ after 1 day. Those same calls at the 2200 strike, would have instead paid you (2800-2200)=600$ + time value + volatility
With V3 not only timing the market becomes essential but also timing the buys. If you see the price of an asset at a point that you are willing to hedge by selling a call and bullish buyers, that could be a great opportunity for you to get in.
What new uses do you have as an option buyer?
One word: Catalysts - Now with flexible expiries you can finally time more precisely an upcoming event that you know will move the asset in a certain direction. Don’t forget, options are also priced around the time left before expiry, so since before we only had monthly epochs, it was expensive to do an options trade around a certain event.Now with V3 you could buy a call/put 1 day before expiry and the event would cost you only a fraction of what it would have cost you before.You can also time the market like I mentioned above, by waiting for a better price of entry.Maybe one day there will even be a bot service that will auto write/buy options at the selected user’s chosen strike when the price hits the user’s price target. We will probably see lots of new inventions being created around these and are looking forward to seeing what emerges.
The formula behind how premiums and rewards are calculated:
This formula above is based on our SSOV-P but it’s also the same for SSOVs. To simplify things and to not only give you guys the raw input, I'll go over a concrete example of a weekly Eth SSOV:
User 1: Deposits 1 Eth
User 2: Deposits 2 Eth after User 1
User 3: Deposits 3 Eth after User 2
-User 1 deposits first day
-User 2 deposits second day
-User 3 deposits third day
Eth rewards = 3 Eth
Day 1: User 1 is the first to deposit, he deposits a total of 1 Eth in the vault. The vault has now have 100% of it’s asset belonging to User 1. So whatever premium is paid by the buyers is 100% his. The 3 Eth reward also goes all to him, since it is distributed linearly over a week, we can conclude that (3 Eth / 7)= 0.4285 Eth/Day
Day 2: Let’s assume all of the options of User 1 have been bought for a total premium of 100$ + the rewards 0.4285 Eth. The premium users receive will only be calculated at expiry.At expiry, the distribution of premiums is calculated depending on how much % of the total premium vault each user owns. In this case before User 2 enters the vault User 1 was entitled to the whole 100$ with a 0% distribution, more on this later.
Now User 2 comes in and deposits 2 Eth for a total of 3 Eth in the pool
The rewards per day that User 1 will receive now will lower because he has a smaller share of the pool. User 1 now has (1/3) 33.33% of the pool,this means from now on he will receive 33.33% of 0.4285/day which= to about 0.1428 Eth/day.
Later that day, 50% of the new options in the vault get bought out giving another 100$ of premium to the premium vault. Now since User 1 represents 33.33% of the vault, he is entitled to 33.33$ of premium on top of his 100$. User 2 collects the rest (66.66$)
Day 3: User 3 comes in like a chad and deposits 3 Eth. As you might of guessed now rewards are split again giving now a whopping 0.0714Eth/Day for each Eth a User has.
Now another chad comes and decides to purchase all remaining calls for a grand total of 400$. This 400$ is split between all users again depending on their vault weight (400/6)=66.66$
User 1 = +66.66 | User 2 = +133.33$ | User 3 = +200$
That’s it! So what happens at expiry?
User 1 Premium -> 100 + 33.33 + 66.66 = 200$Rewards -> 0.4285 + 0.1428 + (0.0714*5) = 0.9283 Eth
User 2 Premium -> 66.66 + 133.33 = 200$Rewards -> 0.2856 + (0.0714*2) 5 = 0.9996 Eth
User 3 Premium -> = 200$Rewards -> (0.0714*3) 5 = 1.071 Eth
If you have any other questions you can always hop onto our Discord and one of our team members or community can help you further: Discord.gg/dopex
Dopex is a decentralized options protocol that aims to maximize liquidity, minimize losses for option writers and maximize gains for option buyers — all in a passive manner. Dopex uses option pools to allow anyone to earn a yield passively. Offering value to both option sellers and buyers by ensuring fair and optimized option prices across all strike prices and expiries. This is thanks to our own innovative and state-of-the-art option pricing model that replicates volatility smiles.
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