Atlantic Options
v0.1
Unlike existing vanilla tardfi option implementations - dopex always strives to innovate in terms of collateral composability and efficiency in a safe and practically usable manner. Atlantic options aim to offer just that as a new options/defi primitive that improves collateral composability and efficiency with a simple working mechanism and practical use cases such as preventing liquidations, providing bond insurance, setting protocol wide price floors via treasury, setting up “buy the dip” strats and much more.
Working
Atlantics have fixed expiries like european options however collateral within it is mobile and movable for other requirements through dopex managed contracts. collateral can be moved out from the option by depositing the underlying token.
The underlying token can be withdrawn at any time as long as the collateral is returned to the option.
Anytime collateral is used in this manner - a funding fee is paid to the option writer based on time elapsed and by deducting the fee from the underlying token. In case of liquidations, the underlying token is moved to the option writer while the collateral is moved to the protocol making use of it within the option.
On expiry, collateral being used is gracefully closed - with either no settlements or partial settlements (writer gets part of underlying in exchange for collateral in-use) and the remaining underlying and collateral is withdrawable by both writer and purchaser.
Use cases
● No liquidation perps: buy atlantic put, move collateral to position when x% away from liquidation (via bots)
● Leveraged non-liquidatable bonds: deposit collateral to bond, managed contract borrows more funds to bond using collateral and purchases
atlantic puts for bond time period, if price gets x% away from liquidation, atlantic collateral is unlocked
● Nested puts: Buy atlantic put, use collateral from atlantic put to sell put at strike x% lower. For example: buy 2k-AP, sell 1.5k-P. This sets up a buy the dip strategy and can be chained in countless variations with options, perps etc. for extended capital efficiency
● No liquidation borrowing: buy atlantic put, move collateral to protocol when x% away from liquidation (via bots)
● Stablecoin insurance + Margin: buy stablecoin AP with different flavors of underlying + collateral, use collateral for margin. For example: buy 1 MIM-DAI AP, deposit 1 MIM, get access to 1 DAI margin for a total of $2 in value
● Capital raising: Accept APs instead of USD as a protocol for bonding, token sales, liquidity provision. Get access to USD liquidity as well as price floors if price moves down x%. This allows for more USD to be raised at a fraction of the cost for depositors
● Single sided LP staking: buy WETH denominated AP, managed contract adds liquidity for token and WETH in LP for incentives, WETH ratio is rebalanced at time of removing from LP in case of IL to reimburse writer with full WETH, buyer of AP receives farming rewards plus partial upside from token going up, receives all farming rewards if no IL.
For example: assume DPX/WETH is 1, purchase 0.5 DPX/WETH AP, 0.5 WETH is unlocked from AP, added to LP staking with 0.5 DPX, remaining 0.5 DPX is added to single staking by managed contract.
Option Writing
Atlantic option writers are token holders looking to buy tokens at prices below market or provide insurance while earning a premium and funding on their locked stables within a defined period of time. This provides an alternative to Curve in terms of stablecoin yield while providing the market with price floors for all liquid tokens considering there would always be USD available to buy dips.
And at the same time improving capital efficiency by making use of the USD set to buy these dips available for perps, borrowing, writing/buying more options, insurance, capital raises etc.
This would increase total accessible capital of the entire crypto market by a factor of 2 at least - on gaining marketwide adoption.
Pricing
Atlantic options are priced at a premium to regular options considering the capital efficiency offered by them. Premiums would be based on Black-Scholes pricing with IV calculated as RV at a premium which's a function of remaining supply of options in the pool and time to expiry - upto a max multiplier cap. Anytime capital is unlocked from the option, a funding fee is paid inversely proportional to the % of capital remaining in the Atlantic option pool upto a max funding % set by governance (aka veDPX holders in the near future)
Pools
Atlantic option pools would have fixed expiries and allow writers to set max prices to write puts at. Purchasers are free to purchase puts at any strike with liquidity available within price ranges that have free liquidity. Writers can deposit assets any time during an epoch.
Fees
Dopex managed contracts would collect fees from all integrations - no liquidation perps/lending, leveraged no liquidation bonds, insurance, capital raises, single sided LP staking and every other application in the future. Fees would all eventually route to veDPX holders and rDPX v2 treasury. Every community led integration - Dopex or non-Dopex - making use of Atlantics would earn a share of the fees collected.
Conclusion
Atlantic options aim to unlock capital efficiency at a level never seen before in any market by essentially making capital work while being locked in limit orders. A single primitive allowing writers to perform 4 steps of capital utilization - farming, selling puts, lending and buying the dip. The possible permutations of Atlantics with other components within the DeFi ecosystem make the target market in the order of trillions - and all of them controlled from within Dopex
managed contracts, earning significant fees for veDPX holders and slowly building up the rDPX treasury.
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About Dopex
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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