DEXTF Newsletter #13
DIP-7 rewards adjustments by the community, Treasury buyback of 53,050 $DEXTF + 3394 B-UMA-USDC, and Implied Volatility and Options
Hey Everyone,
Welcome to this week's edition of the DEXTF Newsletter!
You can follow the community conversations on Discord, Telegram, Twitter, and Reddit!
DEXTF updates
DEXTF Improvement Proposal #7 is live for the community to vote! This further simplifies the reward system to prioritize what the community thinks are the best funds. All rewards will be redirected to a few selected funds, increasing liquidity and tradability
We launched DEXTF phase 2, during which fund managers will migrate their fund tokens from v1 to v2:
For those that want to dig into what’s DEXTF, this is a good start:
Also, DEXTF is hiring! If you think this is you, reach out to us. DMs are open.
Portfolio Metrics
[As of 22nd Jul 2021].
Please refer to the DEXTF website for the latest APRs:
DEXTF/ETH is offering a 67% APR
XTF/DEXTF is offering a 91% APR
You can also earn $DEXTF by providing liquidity on Uniswap (29.6K tokens daily) or investing in any of the XTF funds (12K tokens daily)
Current TVL is US$ 2.05M* (refer to DeFi Pulse)
*calculation includes TVL v1 + TVL v2
You can invest by buying on Uniswap or on the DEXTF app
Here’s a quick guide on how to buy
Protocol Revenue
DEXTF has earned cumulatively US$ 51K in revenue since the Treasury started its asset allocation strategies. This has resulted in an additional buyback of 53,050 $DEXTF and 3394 B-UMA-USDC which were executed this past week.
To date, the cumulative amount of assets bought back by the Treasury are:
168,285 $DEXTF
3394 B-UMA-USDC
Concept of the Week
⚖️ Implied volatility and options
When discussing options, the first thing that comes to mind it's whether that option will be in or out of the money.
Moneyness can be estimated by analyzing the option's implied volatility.
Options are derivative instruments that investors trade primarily to hedge their positions. Traders, most of the time, understand that asset prices follow the well-known random walk.
Despite this knowledge, if you're an options speculator, you must also know that you might be increasing the leverage of an already dicey asset.
Therefore, it becomes helpful to be skilled in probability calculations. In finance and DeFi, conditional probability plays an enormous part in affecting asset prices.
You can understand conditional probability as a simple question: what is the probability of x given y? The "y" could be regulation, smart contract bugs, hacks, billionaires' tweets and even conferences conditioning "x" irreparably.
In particular, with options, you can make a wager on prices without having an obligation to buy or sell that asset. But once a sufficiently large investor base holds a particular option, a fascinating dynamic emerges.
We mentioned earlier implied volatility. Now, implied means future or not realized yet. Volatility's a neutral quantity that describes the magnitude of price moves. Implied volatility is a measure of how news/events affect market prices. The option, therefore, represents the conditional probability of what the underlying asset price might end up when the option expires.
Interestingly, this is a core reason why we need options. And even with this financial instrument, we cannot escape volatility.
Implied volatility affects option premiums, which goes to the advantage of the option holders because the probability of the option expiring in the money (profitably) is higher.
Hence option traders favour volatility. Options also do not escape reflexivity.
The higher the demand for the option, the higher the implied volatility, which leads to even higher demand for it as the price increases.
Who benefits from an increase in implied volatility? Option holders.
However, options writers would reap most of the rewards if the market, at expiration, decides to touch the point of max pain.
Max pain is a theory which states that the strike price where the greatest amount of options was purchased will expire worthless. The reason can be logical; option writers would close out their positions profitably to hedge against payouts to option holders.
Max pain doesn't necessarily need to be painful. The point could be higher than current market price, benefitting the spot market traders rather than causing unnecessary FUD.
Semper Fortis
DEXTF Team