What is Opyn v2
Opyn v2 is an options trading platform for cash-settled European options. It’s powered by Gamma protocol.
What problem does Opyn solve?
Opyn brings options trading to DeFi. At the moment v2 supports only wETH-USDC options but more are coming.
Opyn key value propositions:
Capital efficient DeFi options.
Extensive DeFi insurance.
Flexible DeFi primitive to build on.
How does Opyn v2 work?
Opyn offers cash-settled European options like those in traditional finance. European options are only executable at the expiry but they can be sold prior.
Opyn v2 has an auto-execute that executes in-the-money options automatically. Cash-settled options don’t require any underlying to change hands at execution. The settlement results in a cash payment. Chainlink oracle calculates the execution price.
oTokens represent options contracts in Opyn. Anyone can create unique call or put options for the whitelisted assets. Once an option is created, it’s represented by an oToken contract, and now anyone can buy and trade this option. Sold oTokens have to be fully collateralized.
oTokens on the Opyn v2 interface trade on 0x and it’s possible to trade them on any ERC-20 compatible exchange. The options are priced according to supply and demand.
Opyn recently announced limit orders where you can post offers to sell or buy options for a custom price. If the order gets filled the counterparty pays the gas fees.
What can you do with Opyn?
Spreads
In addition to pure short and long exposure, you can create spreads in Opyn v2. Spreads are used to trade different strategies. The maximum loss structure of a spread can be used as collateral to boost capital efficiency.
For a guide to some of the different strategies, you can trade on Opyn check out this article.
Insurance
Protective putts are a comprehensive hedge against any protocol malfunctions and price decrease.
Companies and individuals using ETH in their operations in the future can hedge against ETH price increase with call options.
Flash minting
With flash mints, developers can mint oTokens without the collateral requirement. The oTokens have to be burned (redeemed) in the same transaction. This can be used for arbitrage between exchanges and collateralizing options with the proceeds from premiums.
Operators
Operators allow users to grant rights to their assets to smart contracts. These smart contracts can be used to roll over contracts or act as portfolio managers. Developers can also build a variety of applications using operators.
How Opyn differs from some of its competitors?
In DeFi landscape.
Hegic is Opyn’s main competitor in DeFi options. Hegic uses a novel pool-based approach with different trade-offs.
Nexus Mutual offers insurance for smart contract deficits. Problem is that it provides coverage for only limited attack vectors and individual claims are decided by governance. Opyn offers protection regardless of the reason the price drops.
In Traditional Finance.
The general DeFi value proposition summarized:
Immutability = trust & neutrality
Global scalability = low cost & accessibility
Transparency = auditability & accountability
Here is a narrow comparison between Opyn and CME Group:
Business model
Opyn does not currently take any fees. Only costs of using the platform come from 0x and gas fees.
Who has invested in Opyn?
Opyn has raised $9.1 million in three funding rounds. It recently raised 6.7 million from investors like Paradigm and Dragon Fly Capital Partners. Opyn does not currently have a governance token.