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UPDATED STRADDLE ACCOUNTING
Introduction
Approximately one month has passed since Atlantic Straddle's release. Our conclusion? We’ve noticed excess confusion around the calculations of PnL and over the collateral exposure, hence this concise article on our UI change.
Short Explanation Of Atlantic Straddles
Let’s first go over a simple explanation of how Atlantic Straddles work.
A Straddle is an options strategy that allows buyers to profit from price volatility.Commonly, producing this position requires the purchase of both an ATM call and an ATM put, which gives the buyers favorable exposure to both the up and downside, but Atlantic’s unique mechanics, allow for this same position through the purchase of only ATM Puts.This is done by increasing the collateral efficiency of the put depositor. When the buyer purchases a Put, Atlantics gives contract owners the right to borrow the collateral within them in exchange for a funding fee. In order to protect the depositor's funds, Dopex limits the collateral to only be usable through whitelisted Dopex-partnered products.
Atlantic Straddle flow:
Buyer purchases Atlantic Straddle by paying the premium to the sellerDopex borrows half of the stablecoin collateral within the Put on behalf of the buyerThe stables are then swapped against the underlying to replicate a long position (creating a synthetic ATM call position)At expiry, the underlying is swapped back into stables, which allows Dopex to settle the contract.
UI Change On Straddle Exposure
Before this update, when Users purchased 1 Straddle, they were purchasing 1 ATM Put. The issue was that 1 ATM Put gave half the underlying exposure of a true Straddle strategy (1 underlying exposure to both sides).
This was confusing, so we have now decided to change it to
1 Straddle = 1 Underlying Exposure (2 ATM Puts).
As simple and straightforward as that!
The price paid for 1 Straddle is the breakeven price on both the up and downside movement of the asset.
Furthermore, we have also updated the calculator in the purchase section to reflect this update.
We hope this small update makes the User experience a tad more friendly and that it facilitates understanding.
As always, feel free to open a ticket on discord for any issues, feedback, or questions.
Our amazing moderators will be more than happy to help anyone out!
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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