Call options on $OPIUM: an alternative to liquidity mining

This post was originally published on opium

We introduce a simpler way for $OPIUM holders to get yield on their tokens

Jun 22 · 4 min read

In short: Stake your $OPIUM to exchange future upside for premiums now or pay a fee to get xxx-leveraged upside!

Over time, in DeFi, numerous liquidity mining programs were designed and distributed hundreds of tokens in rewards. However simple we tried to make it, liquidity mining could be tricky. It involves staking other tokens together with $OPIUM, going to AMMs, risking Impermanent Losses and several other small obstacles that may have prevented some token holders from getting the most out of their tokens. As a part of Opium Smart Farming, we are thrilled to introduce $OPIUM call options.

OPIUM Call Option

A call option is a financial contract that gives the option buyer the right, but not the obligation, to buy the $OPIUM tokens at a specified price at specific maturity date, typically from several months to a year. Seller of such option is obliged to sell $OPIUM at that specified price at maturity if desired by the buyer.

Traditionally, a call option buyer profits when the underlying asset increases in price. They can buy the asset at a lower price specified in the call option contract and immediately resell it at a higher price. In OPIUM, there are typically used $OPIUM-settled options, which eliminate the need to buy and then sell tokens. Suppose the price of the $OPIUM token is above the strike price at maturity. In that case, the buyer receives the entire price difference between the current price and the strike price denominated in $OPIUM tokens.

$OPIUM Staking Pool

If you own $OPIUM tokens, you can stake them into the $OPIUM Call Option pool. The pool is issuing call options, effectively having a so-called covered call position. Pooled funds are used to provide coverage for the option buyers. A seller benefits when the underlying asset decreases in price as they receive the premium from the buyer and can retain their tokens. It is a covered position with hedged risks, popular among asset holders in traditional finance — you agree to redistribute an upside of the future profits (if any) in return for immediate income from premiums.

Staking $OPIUM gives you a covered position with hedged risks, popular among asset holders in traditional finance — you agree to share an upside of the future profits (if any) in return for immediate income from premiums.

If the price of the OPIUM token is above the strike price by the end of the option period, part of the pooled funds will be used for payouts to option buyers.

Depending on the utilisation of the staking pool, you will get yield only on the tokens at risk.

Opium KPI Options coming soon

Being partners of UMA Protocol and inspired by their KPI Options, we are working on another tool, $OPIUM KPI Options, that are part of our Smart Opium Farm © and linked to the $OPIUM performance.

Originally published at https://opium.finance

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