Impermanent Gain vs. Vanilla Options
Last updated
Last updated
Call & Put options ("vanilla options") have been a staple across capital markets offering participants a robust way to long/short the underlying asset, its volatility, and to hedge their portfolios.
Impermanent Gain is very close to an Option in the principle โย it has been created to hedge or cover the most known DeFi Risk: Impermanent Loss. In a sense, Options and Impermanent Gain share the same goal.
Impermanent Gain Options are a new kind of derivative specifically tailor made for DeFi unique risks. Itโs not just a trading strategy, but a primitive for the DeFi Ecosystem.
Impermanent Gain options have many of the benefits you can get from Call & Put options with some unique advantages for speculators and hedgers alike.
The first significant difference to understand is the payoff...
This is due to the fact that Impermanent Gain is a portfolio of optionsโthe key benefits are:
More aggressive payoff for speculators when your options expire in-the-money (ITM)
The most accurate way to hedge a DEX LP position
A second order effect of Impermanent Gain's unique properties is that there is no need to manually choose a "strike" priceโcreating a much simpler trading UX!
However, at the same time, it slightly limits a speculator's flexibility to "build" their ideal position.