Editor's Note: This article comes fromBabbitt Information (ID: bitcoin8btc), Author: Nick Sawinyh, Compiler: Screen, published with permission.

Editor's Note: This article comes from

Babbitt Information (ID: bitcoin8btc)

Babbitt Information (ID: bitcoin8btc)

, Author: Nick Sawinyh, Compiler: Screen, published with permission.

This article is an exclusive interview with Aparna, the founder of Opyn. Aparna introduced us to the background of Opyn, the current situation of the DeFi options market, and the new features of Opyn v2.

Hello! What is your background and what are you doing?

• My name is Aparna and I am the co-founder and CTO of Opyn. I first got into crypto in 2015, that's when I heard about Bitcoin. I grew up passionate about cryptography and Bitcoin sparked my intellectual curiosity and I started following all the reddit forums about Bitcoin. Since then, I have taught blockchain courses at Berkeley. In 2017, I met Zubin and Alexis through Berkeley Blockchain :D.

• Opyn is a capital efficient DeFi options trading protocol that allows users to buy, sell and create options on ERC20. DeFi users and products rely on Opyn's smart contracts and interfaces to hedge DeFi risks or take speculative positions in different cryptocurrencies.

• An option is a derivative contract that gives its owner (the buyer) the right to buy or sell a specific asset from the option issuer (the seller) at a specific price on the European option's expiration date.

The main purpose:

As a means of hedging, options provide DeFi traders with strategies to reduce risk

For speculators, options can provide a low-cost way to long or short different cryptocurrencies with limited downside risk

Opyn v2 options provide DeFi traders with more flexible and complex strategies, such as spreads and combinations, with the potential to profit in any market situation

The liquid options market provides market participants with hedging, leverage, and financial insurance channels, making the development of this type of market a prerequisite for the maturity of DeFi.

What is the Opyn backstory?

I founded Opyn in 2019 with Zubin Koticha and Alexis Gauba, we want to build an inclusive, fair and open financial system. To realize this vision, the necessary derivatives infrastructure and risk management applications need to be established to protect DeFi users. As DeFi continues to grow explosively, the next step is to establish a thriving options ecosystem, which is the only way for DeFi to mature and achieve mass adoption by users. What we do is unlock this opportunity for the DeFi community.

• In February 2020, we launched v1 (Convexity Protocol) which laid the foundation for DeFi options and became the first ERC20 options protocol to go online. For the first time anyone can create, buy and sell options on any ERC20 token. In August 2020, we raised a seed round of 2.16 million to accelerate the introduction of risk management into DeFi and further strengthen Opyn's position as a major DeFi platform, allowing cryptocurrency investors to hedge their Ethereum (ETH) and DeFi investments through options . The round was led by Dragonfly Capital, with participation from Version One Ventures, Uncorrelated Ventures, 1kx, A.Capital, DTC Capital, CoinFund, and angel investors.

• We used the seed funding to grow the Opyn team, focus on recruiting research and engineering staff, and further protocol development and focus on security. As a company, our primary goal is to build the safest and most efficient DeFi options protocol. The team has deep and solid knowledge in building secure financial systems and quantifying options transactions, which confirms our commitment to the DeFi community to build options infrastructure .

• In December, we launched v2 (Gamma Protocol), a powerful and efficient DeFi options protocol. The Gamm Protocol allows users to trade option spreads and combinations for more efficient options. Spreads allow long oTokens to be collateralized against short oTokens, enabling users to stake the maximum loss of a structure. Other enhancements based on user feedback in v1 include: automatic exercise of in-the-money options at expiration, formal verification of contracts, and the ability for anyone to create options in Opyn's option factory (https://opynv2-portal.netlify.app/#/system /factory/) to create new option series and more. A trustless options protocol is critical to unlocking the true potential of DeFi, and we are committed to working with the DeFi community to build a better and more inclusive financial system.

• What are the main differences of v2 compared to other DeFi options protocols?

• Compared with other DeFi options protocols, Opyn v2 has 7 main differences:

• v2 allows for more efficient options trading strategies such as spreads

• v2 has competitive pricing as bid/ask prices are determined by market supply and demand

• v2 allows users to sell options before expiration

v2 allows for flash minting (as long as the option is destroyed before the transaction closes, it can be minted without collateral)

In-funds options with automatic exercise of v2 options

v2 allows anyone to create new options if the product is whitelisted

v2 allows operators to operate/transact on behalf of users

Can you give two schemes for DeFi options trading, and use Opyn v2 as an example to see how to do it?

sure. Let’s look at two scenarios: 1) Alexis wants to protect her ETH investment when the market goes down; 2) Mike wants to earn extra income from some of his ETH holdings

Scenario 1: Protective Puts (Strategy to Reduce Risk)

Alexis holds 10 ETH, which she bought in October for $100 each. With the current price of ETH at $500, Alexis wants to lock in profits and protect against ETH falling back to $100 before December 31. To reduce her downside exposure, Alexis could buy a protective put option with a strike price of the ETH sell price she is willing to accept (eg $400). The protective put option sets a floor price of $400, and even if the price of ETH continues to fall, Alexis will not continue to lose any additional funds until the option expiration date (December 31).

On December 25, the ETH price dropped sharply to $250 and continued at that level until December 31. Since Alexis bought a put option with a strike price of $400, even though ETH is trading at $250, Alexis has the right to sell his 10 ETH at $400 to the put seller.

Summary: Hedging with put options allows individuals to reduce risk at a reasonable cost. Consider buying puts as a form of insurance to limit downside risk; long puts can be used to insure investments against economic downturns. To buy this kind of insurance, option buyers need to pay a certain amount of insurance premium in advance. The benefit to option buyers is that downside risk is limited and unlimited upside is enjoyed in a cost-effective manner.

To buy a protective put option on Opyn, do the following:

1. Select the option family from the drop-down menu in the upper left corner of the trading dashboard and select the desired expiration date from the drop-down menu

3. Scroll down to the Options section and enter the position size in the order box"Finish"4. Select the Approve USDC button and confirm with MetaMask. This step is to authorize the Opyn platform to use your USDC for transactions

5. Select the button to buy oToken, and use MetaMask to confirm, this step is to buy oToken.

6. Select

Finish

, and confirm your position on the Opyn v2 dashboard or Etherscan

Scenario 2: Covered call (creating income)

Mike holds 10 ETH, which he bought in October at $100 each. The current price of ETH is $500, and Mike is looking for ways to earn extra income. He predicts that the price of ETH will remain relatively stable or decline until December 31. To earn extra income, Mike can sell a covered call option above the strike price (say, $600). In this example, a covered call option is constructed by holding 10 ETH and then selling the 10 ETH call option. A call option gives the call buyer the right to buy ETH at a given strike price (eg $600) at a certain time in the future (expiration date).

On December 25, the price of ETH dropped sharply to $250, and remained at this price until December 31. Since Mike sold a covered call with a strike price of $600, the call expires worthless, allowing Mike to retain 100% of the option premium (the option price).

Total: Options are worthless at expiration, and selling a covered call can earn income from the option premium. Selling call options (also known as covered calls) on assets you own is a widely used income-generating strategy. When the price of the underlying asset is lower than the strike price, the call option is not a good deal. The option holder (seller) keeps the option premium as profit.

To sell a covered call option using Opyn:

1. Select the option family from the drop-down menu in the upper left corner of the trading dashboard and select the desired expiration date from the drop-down menu

2. Select the strike price

3. Scroll down to the Options section and enter the position size in the order box

5. Select the Issue oToken button and confirm with MetaMask, this action will issue you the oToken of the selected option."Finish"7. Select the Sell oToken button and confirm with MetaMask. This step will sell your oToken at 0x.

What are your goals for the future?

8. Select

Finish

, and confirm your position on Opyn v2 dashboard or Etherscan

What are your goals for the future?

Throughout 2021, we plan to significantly increase the funding efficiency of v2, enabling users to:

Reduce margin requirements for naked options, trade options on margin, trade options on more assets, and trade on a larger scale than ever before. By lowering margin requirements for unprotected options, users will be able to create fractional collateralized options positions in DeFi with margin and liquidation built in. This significantly reduces capital requirements compared to covered strategies.