Liquidity Providers

Liquidity providers 💰 participate by providing funds (stablecoins) to the liquidity pool. When they do that they receive pool tokens in return following a “post-money” valuation strategy, i.e., proportionally to their contribution to the total amount of capital allocated in the pool including the expected value of open option positions held by the pool (this allows new liquidity providers to enter the pool at any time without harm to pre-existent providers).

Funds are locked in the pool until it reaches its pre-defined liquidation date, whereupon the pool ceases operations and accumulated capital is distributed to liquidity providers proportionally to their participation in the total supply of pool tokens.

A single Defi Options liquidity pool instance is able to trade a wide range of options of different maturities, strike prices, and even underlying assets, thus reducing the pool's returns overall volatility due to diversification. We believe this feature will appeal to liquidity providers that are seeking exposure to options in a more controlled way.