May 26, 2022
AVAX - 26 May 2022 - Dopex Community Token AnalysisCommunity-Analysis-Series
AVAX - 26 May 2022
The Dopex Community Analyst series is a series of strategies, ideas, opinion pieces and educational resource written by independent contributors from the Dopex community. Every month many knowledgeable community analysts share a short analyses of a coin of their choice and share these with Dopex. The goal of these articles is to empower the community and help Dopex increase SSOV volume & deposits. With these articles we hope to provide users with additional information that will help them in making an informed choice of strategy using our products.
Without further ado let’s jump into our next article.
Avalanche $AVAX: Bear Market Options Strat
Quick Stats (as of 05/25/2022)
- Price: $27.95
- Circulating Supply/Max Supply: 268,900,000/720,000,000
- Circulating Supply Valuation: $7.56B
- Fully Diluted Valuation: $20.1B
What we will cover today:
- Platform/$AVAX Token Overview
- Introducing Dopex’s SSOV (Single-Staking-Option-Vault) enables liquidity providers ($AVAX depositors) the ability to earn multiple layers of yield on their $AVAX tokens
- Low risk bear market options strategy for $AVAX long-term holders
Avalanche is a high throughput blockchain platform that seeks to unify the trading and exchange of assets on a global level. A single market where buyers and sellers alike can come together to trade assets efficiently and in a legally compliant way. This includes (but not limited to) stocks, commodities, and alternative assets. Self proclaimed, “The Internet of Assets”, Avalanche currently has over 100 different projects that utilize the project platform, 950+ individual block-producing validators, 500,000+ global users, and has burned (think stock buybacks from public comapnies - Apple, Google, Microsoft) well over $1.4m value in $AVAX to reduce total supply and bring value to their token holders. Many projects/users have found DeFi to be non-compatible with L1 Ethereum and see Avalanche as the superior alternative. $AVAX, the native token, has a hard-capped supply and thus a scarce asset. The native token is used to pay platform fees, secure the platform through staking, and provides a basic unit of account between the various projects/assets trading throughout. Avalanche is an extremely efficienct blockchain platform capable of securing thousands of transactions per second. Avalanche pairs this efficient engine with an architecture to perfectly fit the needs of it’s platform users. This architecture comes in the form of sub-networks that are fully customizable and enable anybody to launch a tailor-made network with unique virtual machines.
TL;DR, $AVAX is doing the most to ensure deployment of an efficient single blockchain to unify the trading of assets on a global level.
Option Play: Covered Calls
So, how do we play $AVAX when the market is being so damn bearish? And what exactly does it mean to deposit your $AVAX into the Dopex SSOV and what risks come with this? Are funds safu? Yes, your funds are entirely safu while you become an options liquidity provider. Your $AVAX will now be sold on Dopex’s open option market (at your selected strike price) and accrue a premium on top of the farm yield. Hence the multiple layers of yield. Premiums are paid in the underlying asset ($AVAX in this case) while your APY rewards will be paid out via $DPX, Dopex’s native governance token. Lets take a look at how the past epoch $AVAX depositors faired. $85 strike = 30.37% APR, $100 strike = 85.26% APR, $115 strike = 36.31%, and $130 strike = 13.08% (APR percengtages are subject to change and not set in stone but determined by market activty). Then, you accrue the additional layer of yield from $AVAX farming. Covered calls are a strategy where an investor who holds a long position on an asset writes (sales) calls on that same asset. It is a strategy implored when the investor believes the token will not move much in the near term. So, in this instance, you would deposit your $AVAX in the Dopex SSOV at your selected strike price. When we look at the market cap of Avalanche there would need to be a major swing in momentum. This current epoch has strikes at $60, $65, $75, and $85 which are all likely very safe. Depositing in any of these strikes will allow you to maintain exposure to your token while also collecting a comfy premium. “How much”, you ask? Well, looking at historic data (last epoch) you can net anywhere from 13.08%-85.26% (picture above) depending on which strike you deposit at and current Dopex SSOV $AVAX liqudity. These historic APRs are subject to change and are determined by the amount of options purchased.
“DeFi. Wat risk of depositing in Dopex SSOV?”
- Let us examine this scenarios:
- Worst case: You deposit your $AVAX in the Dopex SSOV at a strike price of $65. You collect $5 premium per call but the price drop of $AVAV exceeds that of collected premium. This options strategy is great for high conviction plays/long on $AVAX and are going to hold regardless of market conditions. Another scenario where you could end worse off is if $AVAX were to rocket from $33.37 to $80. Your $AVAX deposit is sold at a nearly 100% return, you enjoy the premium collected from your option sales, and you earn farming emissions for the period (doesn’t sound bad, right?). The risk you take by executing this options strategy is capped upside. In this scenario, you give up ($80-$65) $25 of upside as you agreed to sell at your strike price, which is now lower than market value. The question you have to ask yourself is how likely is it $AVAX will reach prices of previous months.
- Best case: You deposit your $AVAX in the Dopex SSOV at a strike price of $65. $AVAX then jumps 50% within the month ending at approximately ~$50. You face no forced sell, thus maintaining your long position while collecting premium from your option sales, and you earn farming emissions for the period. Comfy.
Disclaimer: Author owns spot position in $AVAX. These statements are intended to disclose any conflict of interest and should not be misconstrued as a recommendation to purchase any token. This content is for informational purposes only and you should not make decisions based solely on it. This is not investment advice.
Views expressed in this article are the author’s own and not reflective of the position or professional views from Dopex.io.
Dopex reimburses analyst contributors with a small payout to partially compensate the time spent on research and writing. For questions feel free to jump into our discord (discord.gg/dopex) and chat with the team or analyst contributors directly.
Dopex is a decentralized options protocol that aims to maximize liquidity, minimize losses for option writers and maximize gains for option buyers — all in a passive manner. Dopex uses option pools to allow anyone to earn a yield passively. Offering value to both option sellers and buyers by ensuring fair and optimized option prices across all strike prices and expiries. This is thanks to our own innovative and state-of-the-art option pricing model that replicates volatility smiles.
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