1/11 HODL vs. LP vs. Calls — which one's best?
⬇️❗HODL downside is substantial (can go to 0)
🧢 LP upside is capped on Uni V3 — token goes up, you now hold the other token
🚫🧢 Call options have unlimited upside, capped downside — but pay premia
Incoming backtest 🧵👇
2/11 Let's backtest *hypothetical* DeFi call options (wen Panoptic? 😉)
🗓️ Jun '21 - Feb '23
⚖️ Periodic rebalancing (day, week, or month)
Strategy:
1. Buy at-the-money (ATM) call option
2. Exercise/close at end of period
3. Pay LP fees as premia
docs.panoptic.xyz/docs/panoptic-…
3/11 📞Return breakdown on $ETH daily call options
Payoff: 519%
Premia: 397%
Profit: 122%
(All values are USDC)
👉Payoff > Premia → Profit🔝🤑📈
That's pretty good! How does it compare to other rebalancing periods?👇
4/11 Dailies vs weeklies vs monthlies:
🌕 ETH Dailies: 122%
🧑🚀 ETH Weeklies: 11%
🚀 ETH Monthlies: 28%
👉Active management for the win!👈
(Keep in mind this doesn't account for gas fees⛽ — future #ResearchBites 😉)
Good returns, but can calls survive a bear market?👇
5/11
🐂 Bull Market: June '21 - April '22
👉 Compare w/ ETH HODL return: 0.8%
🐻 Bear Market: May '22 - Feb '22
👉 Compare w/ ETH HODL return: -41%
Not only did call options survive a bear market, they blew HODL out of the water 💎🙌🙅🏻♂️🌊💨
6/11 What if you had chosen another fee-tier?
🌕 ETH-USDC 5bps: 122%
🚀 ETH-USDC 30bps: 95%
🧑🚀 ETH-USDC 100bps: 66%
👉The 5 bps pool outperformed, here's why👇
7/11 Here's how different fee-tier pools breakdown:
🧾 The 5 bps pool had the least trading fees (premia)
🚀 The 5 bps pool had the most upward price action
👉 That's why the 5 bps pool was the most profitable!👈
8/11 Key Insights:
💎🙌 Calls > HODL b/c capped downside
🌊 Calls > LP (we tested this last time👇)
🐂🐻 Bull markets are best for calls, bear markets were OK
🚀 Bullish price action = high payoff
💰 Payoff > premia → profit!
9/11 Caveats:
⛽ Ignores gas/spread/swap fees/commission
💲 Assumes put option premia = LP collected fees
❓ This is hypothetical — you can't buy call options on Uniswap (Panoptic soon 🤫)
10/11 Disclaimer:
📢 None of this should be taken as financial advice.
⚠️ Past performance is no guarantee of future results!
11/11 Comment below with questions.
Follow @Panoptic_xyz and @BrandonLy1000 for more #ResearchBites and other key updates!
Check out our blog 👉 panoptic.xyz/blog
Star & follow our GitHub repo 👉 github.com/panoptic-labs/…
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