Thread by @Panoptic_xyz

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!

https://twitter.com/Panoptic_xyz/status/1633602281894715393

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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https://twitter.com/Panoptic_xyz/status/1636122852054425600