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Mar 15 • 11 tweets • 5 min read
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/…

🤝 Like & Retweet if you found this thread helpful!

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More from @Panoptic_xyz

Panoptic Profile picture
Mar 14
1/13 📈 Want to understand the potential risk/reward of options trading?

Look no further than the Greeks!

We'll break down Delta, Gamma, Theta, Vega, & Rho and explain how they can help you make more informed decisions when trading Panoptions 😉
2/13 The Greeks are a set of risk measures used in options trading to help investors understand the potential risks and rewards associated with their positions.

Continuing our #ResearchBites series on the Greeks, we'll discuss:

• Delta (Δ)
• Gamma (Γ)
• Theta (Θ)
• Vega (ν)
3/13 Delta (Δ) measures the rate of change of an option's price in relation to changes in the price of the underlying asset.

Mathematically, Δ is the partial derivative of the option value (V) w.r.t. underlying price (S)

Ex:
Δ=1 → V increases by $1 for every $1 increase in S
Read 13 tweets
Panoptic Profile picture
Feb 22
1/25 DeFi Options Trading Is Powerful!

There can be unlimited upside…😈
But also unlimited downside 😣

Every trader should know how to create these 18 options strategies in @Panoptic_xyz for any crypto asset, any strike, any size:

❤️ & rt 👇 Image
2/25 In this thread we'll cover:

1. ⤵️
2. 📞
3. 🤸🏽‍♂️
4. 🙅‍♀️😵
5. 💎🦎
6. 🦖
7. 🥌🦋
8. 📞🧈
9. 🦸‍♂️🐂
10. ⤵️🧈
11. 🦸‍♂️🐻
12. 🥌🦅
13. 📅🧈
14. ↗️🧈
15. ⚖️🧈
16. 🦇
17. 🦓
18. 🦓🦓🦓
3/25 Think $HEX is worthless?

"Put" your money where your mouth is:
Buy a "put"⤵️ Panoption!

Substantial upside 😈
Limited downside 😋
Bearish ⬇️

Short LP position Image
Read 25 tweets
Panoptic Profile picture
Feb 15
1/13 Why are some pools good 🐶 and other pools bad 😈?

The answer comes from breaking down LP profits into:
1. Price changes 📈
2. Fees collected 🎟️

By comparing LPs to options, we discover parallel insights — let's explore! 🧵
2/13 Price changes
⬆️ Price up: positive return
⬇️ Price down: negative return
⤵️ Payoff determined by delta (Δ) & gamma (Γ) of LP position

Why use options terminology (Δ & Γ) for LPs?
Hint: that payoff looks awfully like a short put option!
3/13 Fees collected
• Determined by theta (Θ) of LP position

🕒 Θ: Rate of time decay (dV/dτ)
💰 dV = fees collected
🧊 dτ = 1 block

→ Θ = fees per block 🤯

✅ Near the money: Θ > 0
❌ Far the money: Θ = 0
Read 13 tweets
Panoptic Profile picture
Feb 10
1/12 The weekly volume on all NFT trading platforms was $120M last week. This includes BAYC, CryptoPunks, LOOT, Azuki, etc.

But...

$23 billion (yes, with a B) of value was traded on Uni V3 as financial NFTs 📈

Here's 8 reasons why @Panoptic_xyz is bullish on financial NFTs🧵
2/12 First of all: why is Uni V3 a financial NFT platform?

Liquidity in Uni V3 is deployed under a price range, which means LP positions are non-fungible and can't be tracked using ERC20s

Instead, Uniswap issues an ERC721 to track the funds controlled by each LP position
3/12 Reason 1: Most derivatives in TradFi *are* NFTs

—
Futures contracts expire at a set date, and each underlying has multiple tickers:
The Canadian dollar futures \6CH3 (exp. MAR-23) is different than the \6CM3 (JUN-23).

Options follow the OSI standard for exp, strikes, etc.
Read 12 tweets
Panoptic Profile picture
Feb 8
1/11 We simulated LP performance for 21 popular Uni V3 pools (high TVL & volume)

Results were surprising:
📢 LPs can be profitable!

💰 Which pools made the most?
📏 Are narrow or wide ranges better?

Find out 🧵
2/11 Previously, we explored the ETH-USDC 30bps pool.

For this study:
🗓️ Jun 2021 - Jan 2023 (20 months) for most pools
⚖️ Daily rebalancing
📏 Narrow (r = 1.05) & wide (r = 1.75) ranges

Here's how other ETH-stablecoin pools compare👇
3/11 Bad pools 😔 (but can you spot the good pool 🐶?)

• ETH-USDC (5bps): -18%
• ETH-DAI (30bps): -14%
• ETH-USDC (30bps): -12%
• ETH-USDT (30bps): -11%
• ETH-USDC (100bps): -9%
• ETH-USDC (1bp): -6%
• ETH-USDT (5bps): -3%
• ETH-DAI (5bps): +7%

(Returns in stablecoin) Image
Read 11 tweets
Panoptic Profile picture
Feb 7
1/13 How do you know if one LP position or portfolio is riskier than another?

Is LPing riskier than HODLing?

This is the first of a series of threads where we discuss different types of risk, how to interpret them, and how to hedge them.

Let's dive in!
2/13 Risk measures (RMs) are crucial in assessing the stability and performance of a portfolio, and they can be used to guide investment decisions.

When providing liquidity on Uni V3, there are several key risks to consider such as volatility, market risk, etc.
3/13 Some commonly used risk measures are:

- Beta (β)
- Value-at-Risk (VaR)
- Conditional Value-at-Risk (CVaR)

All of these measures are related to the volatility of the portfolio. In particular, high volatility typically implies high risk.

Let's discuss them in more detail 👇
Read 13 tweets

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