Even professional traders in traditional finance start biting their nails when asked about ‘Portfolio Margining’. A decentralized project building at the MtnDAO hacker house in Salt Lake City is now bringing the concept to crypto options. As a result, trading derivatives on the Solana blockchain will become more attractive.
Solana-based few decentralized finance (DeFi) protocols built on Solana already offer on-chain options trading such as Zeta Markets and PsyOptions. The liquidity on the platform is not sufficient for keeping options markets moving smoothly in Solana DeFi, opined experts.
Investors received a chance to predict the future prices of BTC and ETH as the options trading went live on Monday. To be run by an automated market maker (AMM), it is the first decentralized options exchange on Solana. It has become possible due to portfolio margin. Its selling point is that it can make trading less capital intensive. Because of the potentially high risk, it’s usual to ask traders to post collateral to back transactions. Holdings all over in their portfolio are considered while calculating the margin they have to post. The collateral requirements are usually eliminated.
Pentameal, the mysterious founder of OptiFi, revealed that the depressing state of on-chain options liquidity triggered him to revisit his ideas on how to structure his market. OptiFi became “capital efficient,” and attracted market makers. In addition, it increases liquidity on the order book and keeps spreads of the exchange intact. Pentameal further added that more traders want to trade on OptiFi.
As of Monday, just 14 accounts perform trading. They are able to do $120,000 worth of trading. Eight protocols gave their crypto to the AMM pools of the protocol, where they can earn yield. OptiFi will still be targeting $20 million in total value locked (TVL), said Pentameal. According to the founder, at this point, the traders will be moving around $1 million to $2 million a day on OptiFi. The activity on DeFi protocols has TVL as the popular metric for measuring it.
Source: https://www.thecoinrepublic.com/2022/08/10/this-new-dex-on-solana-brings-portfolio-margining-to-crypto-options-trading/