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What is Opyn?
Opyn is a capital-efficient DeFi options trading protocol that allows users to buy, sell, and create Ethereum-based options. DeFi users and products rely on Opyn’s smart contracts and interface to hedge themselves against DeFi risks or take speculative positions on different cryptocurrencies. Opyn uses 0x’s unique off-chain relay, on-chain settlement architecture, to offer free limit orders to its users.
Key points
- Options are derivatives contracts that give the buyer the right, but not the obligation, to buy or sell a fixed amount of an underlying asset at a fixed price on a specific date (for European options).
- People use options primarily for income generation, speculation, and hedging: \n » DeFi traders use options as a risk-hedging tool (i.e., limits downside losses on declining asset prices). \n » Speculators use options to gain low-cost, leveraged directional exposure with limited downside risk. \n » Income seekers use options for recurring yield/income generation.
- Options are different from other derivative contracts (forwards, futures, etc.) in that with any options trade, the holder has the right, but not the obligation, to exercise their contract.
Introduction
Squeeth (squared ETH) is a new financial derivative invented by the Research Team at Opyn (Zubin Koticha, Andrew Leone, Alexis Gauba, Aparna Krishnan), Dave White, and Dan Robinson. Squeeth is the first Power Perpetual and gives traders perpetual exposure to ETH².
Mechanism-wise, Squeeth functions similar to a perpetual swap, tracking the index of ETH² rather than ETH. It provides global options-like exposure (pure convexity, pure gamma) without the need for either strikes or expiries, effectively consolidating much of the options market liquidity into a single ERC20 token.
In short, Squeeth makes options perpetual and is a very effective hedge for Uniswap LPs, all ETH/USD options, and anything that has a curved payoff.