We are excited to announce that Auctus ($AUC) is the first on-chain options protocol to release private options pools, enabling liquidity providers to create their own options AMMs where they control the pool settings such as implied volatility, strike price range, and expiration range.
One month ago our advisor Felix got into a little heated argument with Molly, the anon founder behind our biggest competitor Hegic. At the heart of the conversation was the fact that Hegic LPs were losing money because their pools are poorly designed.
Don’t take our word for it, here’s the Dune Analytics Dashboard of their two pool performances:
As it stands right now, Hegic LPs are writing puts and calls at any strike with any expiration. Options are products that have non-linear risk/reward. Some strategies take on a lot of low probability risk for small high probability profits, yet other strategies take on a small amount of high probability risk in exchange for a lot of low probability risk. In simpler terms, options risk profiles vary wildly based on strike, expiration, underlying, and IV.
In the traditional world there are market makers for options exchanges and they do not blindly take any trade offered to them. Sometimes they pass, other times they charge a premium to fill size. Never do they run a net-loss business in the hopes of breaking even based on token airdrops (when did this become the norm? lol).
As Felix pushed back against Hegic’s approach, he boiled the next stage of options pools down to the following: “The dream version of a pool imo is where users specify a few strikes and expirations, and the pool adds liquidity to all, maximizing their writing” to which Molly gave the middle finger and said “u can make a list of 99 problems Hegic has but ur opinion means nothing until ur dReAm vErSioN can do this in mainnet”
Well good news! The dReAm vErSioN, now entitled private pools, inspired by Balancer Labs Smart pools, is officially live on mainnet!
With Auctus’ brand new Private Pools, you can now:
- Set your own IV:
Higher IV = Higher Premiums
Lower IV = Get filled more frequently
This is comparable to setting a higher swap fee on balancer.
- Set your own Strike Price Range:
Don’t want to sell at the money or in the money options? No problem, you can pre-define exactly what percent above or below price you want to sell options at.
- Set your own Expiration Range:
Don’t like taking too much risk of having the price run a certain direction and getting stuck with options you wrote 2 months ago? No problem, you can pre-define how many days you want to write options for. Whether you want to write daily options, weekly options, or monthly options is up to you.
This way if you’re a whale, liquidity provider, or super user, you can now automate your on-chain options strategy in a STRATEGIC way, as the name is supposed to imply. The goal is to provide on-chain options liquidity providers with the tools necessary to net-profitably write options where their pools become a competitive alternative to the countless yield generating strategies available.
Once you select the pool you get the to your pools overview page. Here you can see its performance against both USDC and the underlying.
Since this pool was just created it does not have any open positions or trades, but unlike the public pools you see the blue update boxes which allow you to edit the private pools settings at any time.
Once you select IV, it allows you to change the pools implied volatility, a setting that empowers you to raise or lower premiums for whatever reason, be it volatile markets or merely high demand for the options you’re offering.
Once you select ‘Update’ on ‘Selling options’, it enables you to select a range of days as well as a price range within which you’d like to sell the options. This enables hodlers for example to only be selling options on a recurring basis, far out the money that they don’t think would be exercised. But as we know from CEX’s some of the most in demand options are exactly those far OTM call options. This enables liquidity providers to apply a writing strategy that fits their market perspective, and change the settings as their perspective on the markets shifts.
To help track performance further, you can see every single transaction that the pool has done, as you are likely used to from traditional AMMs giving you an added layer of transparency into your pools performance:
We are looking to work with options market makers, crypto funds, and whales to make Auctus the most liquid options trading platform in the space.
We can set you up options pools on any ERC-20 token with a Chainlink price feed. Once the pool is set up, you are in control of deposit, redemption, collateral conversion, IV, expirations, and strikes via our easy to use dashboard shown above.
The on-chain options market is currently high in demand, and users are willing to pay premiums over centralized exchanges, so this is a highly lucrative opportunity for liquidity providers with a strategy.
To kick things off, Hartmann Ventures has committed $200,000 to testing and trialing the private pools to make them the first profitable options AMMs. Upon successful trial of pool settings, Hartmann Digital Assets will commit more significant options liquidity.
If you are interested in a live demo or want us to set up your private pool, please contact [email protected]
On the operations front, the Auctus team will be focusing on bringing on more option market makers and liquidity providers, while the tech team will be creating more visualizations and improve UI for users to better take advantage of the options liquidity available at different strikes and expirations.