{"id":888,"date":"2022-08-14T21:40:56","date_gmt":"2022-08-14T21:40:56","guid":{"rendered":"https:\/\/solanacrypto.news\/2022\/08\/14\/crypto-options-trading-on-solana-has-mostly-fizzled-a-new-dex-has-a-plan-to-change-that-4\/"},"modified":"2022-08-14T21:40:56","modified_gmt":"2022-08-14T21:40:56","slug":"crypto-options-trading-on-solana-has-mostly-fizzled-a-new-dex-has-a-plan-to-change-that-4","status":"publish","type":"post","link":"https:\/\/solanacrypto.news\/2022\/08\/14\/crypto-options-trading-on-solana-has-mostly-fizzled-a-new-dex-has-a-plan-to-change-that-4\/","title":{"rendered":"Crypto Options Trading on Solana Has Mostly Fizzled. A New DEX Has a Plan to Change That"},"content":{"rendered":"
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SALT LAKE CITY \u2014 Even for traditional finance pros, talk of \u201cportfolio margining<\/a>\u201d is the kind of thing that\u2019ll make most eyes glaze over.<\/p>\n

And yet it\u2019s vital plumbing that helps make conventional markets work. A decentralized finance (DeFi) project building here at the MtnDAO hacker house in Salt Lake City is bringing the concept to cryptocurrency options, hoping that\u2019ll make trading the derivatives on the Solana blockchain more appealing.<\/p>\n

Options trading on OptiFi went live Monday, allowing investors to speculate on the future prices of BTC and ETH (SOL is on the way). It\u2019s the first decentralized options exchange on Solana that\u2019s powered by an automated market maker<\/a> (AMM), something its backers say is only possible because of portfolio margining.<\/p>\n

The appeal is that it can make trading less capital intensive. In derivatives, it\u2019s typical to make traders post collateral to back transactions, given the greater risk. With portfolio margining, holdings throughout their portfolio are taken into consideration when calculating how much margin they have to post, often significantly cutting collateral requirements. Money that would\u2019ve otherwise been locked up as collateral can instead be deployed elsewhere.<\/p>\n

On-chain trading<\/h2>\n

A handful of decentralized finance (DeFi) protocols built on Solana already offer on-chain options trading, including PsyOptions and Zeta Markets. But there\u2019s not enough liquidity to keep options markets moving smoothly in Solana DeFi, according to some experts.<\/p>\n

OptiFi\u2019s pseudonymous founder Pentameal told CoinDesk during an interview in Salt Lake City that the sorry state of on-chain options liquidity prompted him to rethink how to structure his market.<\/p>\n

Portfolio margin makes OptiFi more \u201ccapital efficient\u201d and thus appealing to market makers, he said. Plus, it increases liquidity on the exchange\u2019s order book and keeps spreads \u2013 the gap between prices to buy and sell, and the main way AMMs make money \u2013 tight.<\/p>\n

\u201cMore traders are willing to trade on OptiFi\u201d as a result, Pentameal said.<\/p>\n