Thread by @defipulse

1/ 🍇 DeFi Pulse Drop #19: @sirenprotocol 🍇

On SIREN Protocol, both the long and short sides of an options contract are represented as ERC20 tokens.

This allows traders to swap in and out of options positions on both sides and build complex portfolio positions via SIREN's AMM.

2/ It starts off with Liquidity Providers depositing collateral into the SIREN AMM pool. So for WBTC/USDC calls, the collateral would be WBTC.

When a trader goes to buy options from the AMM, the collateral held within the pool is used to mint a pair of tokens: bToken and wToken.

3/ bTokens or buyTokens are sent to the buyer and gives the holder the right to purchase or sell the underlying asset at a predetermined strike price.

Users pay a premium to the pool in the collateral asset each time they make a trade which incentivizes liquidity providers.

4/ Meanwhile the wTokens, short for writeTokens, stay in the pool. If the option is unexercised, wTokens allow you to withdraw the collateral or withdraw the exercise payment from the contract after expiration.

LPs passively become covered option writers to meet trade demand.

5/ SIREN AMM v2 can trade up to 6 SIREN options contracts which all share collateral and payment assets in a single pool.

This enables liquidity roll over when a market expires for a seamless UX for LPs and spreads exercise risk across multiple strike prices and expirations.

6/ This design also requires no third-party settling mechanism or order matching to complete option settlement on-chain.

SIREN only trades bTokens, but not wTokens. However, trading of wTokens may become available in the future.

Learn more about SIREN
defipulse.com/blog/siren/

7/ This is paid promotion as part of our DeFi Pulse Drops series where DeFi Pulse works with projects to launch their new features and builds. If you want us to work with you, please get in touch!