1. A #Zeta101 thread on why options in DeFi don't quite work – yet 🧶😅
2. Hey ZetArmy, wanted to check in and do a quick brief on options in DeFi. Options are without a doubt, one of the most popular instruments for traders to lock in returns, hedge risk, and speculate on prices.
3. Let's talk about why options work in TradFi. Liquid markets mean tight spreads, low fees, and an infinite possibility of strategies. r/wallstreetbets has an entire community of people who love trade options, whether its Thetagang, GME bulls, or TSLA bears.
4. So why don't options work as well in DeFi? Borrow/Lending platforms are established, DEX infrastructure is exploding, but derivatives (particularly options) are still nascent. 1 reason is because derivatives are a 2nd-order product, they needed base primitives to be built 1st.
5. Another huge reason = cost. Options are usually a way to get leverage, and make cheap bets with great odds. This is not the case in DeFi. Gas fees are expensive at times, and spreads are wide. The Jul30 ETH 2000 Put on Opynv2 trades $20 wide, Deribit's spread is less than $8.
6. The implicit costs of waiting minutes for a tx mean that traders can't put opinions into the market in real-time. This has huge opportunity costs. In Tradfi High-frequency traders spend hundreds of millions in $$$ a year on infrastructure just to make sure this doesn't happen!
7. Don't get us started on capital efficiency as well. Money makes money, and if you have to park trading funds as collateral, it's not getting used elsewhere. Money locked up in margin doesn't farm yield – and its yet *another* cost.
8. At Zeta, we think that our platform fixes all these problems. With the speed, and close-to-zero cost of Solana, as well as our unique OMM, trading fees reflect CeFi levels. Zeta also optimises margin costs to DeFi-leading levels.
9. As an aside, all these issues are being addressed at light speed across all projects. DeFi options are getting better, and maybe L2 will help! Opyn v2 has undercollateralized options, and DeFi spreads are getting tighter by the day.
10. If you're curious about Zeta, you can find more on it here zetamarkets.gitbook.io/zeta/ . You can also follow us for more deep dives into option AMM systems, liquidation engines and more!
11. We're so excited to have you alongside us in our journey!
#Zeta #ZetaMarkets #Solana #DeFi
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