On July 22nd, we had an exciting AMA on the topic of “How to trade against the volatility in the bear market?”. Guests from Volare Finance, Ava Labs, Ledger Prime, and COBO had a heated discussion. Over 300 listeners has joined the AMA and raised up valuable questions.
● May, Head of Business Strategy @FinanceVolare
● Eric Kang, Business Development @avalabsofficial
● Laura Vidiella, VP of BD & Strategy @ledger_prime
Find the highlights below.
01 Market Overview
Eric: How do you think of the prevailing trends in crypto?
In general, August is probably going to be like pretty calm, just
historically. Pretty much everything is still held on the VC side,
meaning that there's no, like a liquid token, so far, so we're kind of
like looking for that incremental buyer right? So not trading anything
right now. It's just kind of like back and forth between what we have.
are seeing the whole crypto space is moving the moving to the right
direction, moving in a healthy way. So one thing we need to keep in mind
is that that's an effort of better risk control, so it is those loans
are just not free money. They have to put in a a a reasonable margin
collateral, high quality collateral so that they can get along so. We are in a trouble trouble time, but we see a lot of protocol is still running healthy, so that's the way the overall course space is moving.
Lei: We can probably expect the one upward movement in the crypto market in the near future. I'm quite confident on the on the long term perspective in terms of the market move. From the market structure perspective, actually we've seen a lot of institutional investors are raising their chips.
supply is being transferred from like weekends to those with strong
hands with long term conviction. That's a good sign. But on the other
side, the. Transparency that in the crypto markets is the main reason
you know that we've seen a lot of failure recently. We should have the more confident in the in crypto markets.
02 Option Trading
Kimbol: Most of the people still believe we have a short term panic. But however, beyond the one month horizon, probably going to go back to neutral. May not be that quick, but that's the way that's the direction that based on what the the supply and demand is going.
So good strategy for now for a for Hedger probably we can do a self from and straddle sell July $15 line coin put and buying August or even September $15 coin put buying $15 straight out September. Probably we're going to see something different term structure back to normal in September.
Laura: Any protocol that is building structured products, for instance, is a really good case for asset managers. Overall, the issue that we find currently is that most of them do not. Offer a way to manage the risk properly. Now finally, there is like more development into that right, and when you're better ways of like better tools for like risk management and capital efficiency overall. That's yeah, a little bit of a nutshell how we would more or less run it.
Lei: Like TVL's, we must win the implement laws as well. So if something went wrong so we would take the action very quickly and that's one side. But on the other side we also, you know, take advantage of the derivatives. The the risk exposures of the portfolio like, we managed to Delta and the manager, Greeks of the portfolio so that you know even that that more important than that defy project because the things went faster.
03 Trading Strategies
Eric: How should we be trading in this volatile market?
Laura: Using yourself there a little bit post still protecting yourself against something that might not happen as expected, right? Just keep up with like any other announcements related to things that you want to look into.
Lei: In the in the volatile markets, I think hedging can be more flexible and more interesting. There are a lot
of useful tools to select from. With different option strategies to. To hedge like different situations of the markets.
Sometimes if you the hedging strategy is is correct and even you know generate additional profits to your portfolio, that's I think a lot of the traders would what what, what, what will be favorable about that.
Kimbol: Where we normally have a standard vanilla European options, we also going to. This will be the day to item day one is for the vanilla Europeans date will be the exotic libations, but also the next release. Will we have a combo bot come into play so you can pull it out? Option combination like a straddle? Strangle reservoir cells as well as your underlying fixed income. Fixed income yield. And then we will get a. Right now we are still 100% margin, which is quite safe for now. But eventually with the world combo come into play, we're going to see things like portfolio margin. Direct margins that control. Both the leverage gives the gives the user leverage on their portfolio.
04 Feature of Volare
Kimbol: We are testing on the testnet. Everything you need to carry out a trade to settle a trade through the exercise. The transaction price we're going to have a historical trade, your inventory, your position as well. We're going to have some chart show you the payoff of of the option you're buying. You're interested in. Seems like that pretty standard for a regular option trading desk.
Right now you can just one option at one time than that. You have to put a full collateral for one option. Say you say you you buy the the 15116 hundred cosplay right now you can. I mean you can do that, but it just costs you the same same amount of money in the food. I would say 100% margin for the 1,500 call.
Question: I wonder is Volare Finance similar to other option trading platform amount opinion. So what do you think? What kind of feature makes it stand out compared to other platform?
Kimbol: Number one we we had DeFi space. We are kind of hybrid, so we still have our order book that match the order, but once the order is done, it's treated. We'll bring the order to the chain to onchain to settle it. So that we will step away, step out of the picture. The buyer and the seller they are. They are meeting each other. They're facing each other. There's no meeting between. So yeah, everything's transparent. So you not only save settlement Camp auto matching time, also save guest fees
05 Option Trading
Question: For those of us who may not be like straight ball traders or market makers and are just maybe looking to think about options in a more directional view. Either you know to protect our cash positions? What are some strategies that we can use on full air to potentially kind of express those views?
Kimbol: Yeah so. A straightforward would be just buying the downside port. Certification. You want to to Max protection you want once the underlying fall below say a certain level says 1300 line then that's your Max loss from here to 1300. Yeah, maybe about 200. That's your Max loss. It's also the the standard way of for a performance manager or fund manager to hedge their downside. Well, there's a the cons for this strategy is outside. Alright put will cost a lot of money given right now the market voice over 100%, so a combination of different pool strategy output call buying, buying downside, selling outside call will give a similar coverage, but at a less leverage. You will probably give up your outside to get a downside protection. Something like that, or you buy the downside pool, then you buy yourself deeper. You sell a deeper put to kind of subsidize your. Yeah, put option buying yeah.
06 Backer of Volare
What's the relationship between the organizations today and want to know more about Volare's backers. Could you elaborate on this?
Eric: I can take that. Volare right now is built on the Avalanche platform. I'm a part of the Ava Labs team helped specifically focused on DeFi protocols. So I've been talking to the Volare team supporting their development here.
When Volare goes on mainnet, so excited to see you know the team's progress over the next coming weeks months. But yeah, we expect to do this again very soon.
About Volare Finance
Volare is a leading provider of option trading, who provides a transparent, trustworthy, and convenient decentralized mechanism without intermediaries on option trading which can imitate the serviceability of centralized exchanges.
Volare's DeFi protocol creates a perfect solution for trading options in crypto. It provides a DeFi option protocol for European options, option combos and exotic options. It also allows investors to invest in standard or customized option strategies portfolios, and provides clients tools for hedging, speculation and yield enhancement based on its infrastructure.