OptiFi
  • Welcome to OptiFi
  • Key Innovations
  • Roadmap
  • 🎯OptiFi in Depth
    • Margin Requirements
      • Portfolio Margin
      • Portfolio Margin Calculations
      • Liquidation Mechanism
    • OptiFi Market Maker (OMM)
      • OMM Design
      • OMM Orderbook Pricing
      • Delta-Neutral Hedging
      • Continuous Functioning of OMM
      • Withdrawals from OMM
    • Options Contract Specifications
    • Account Summary
    • Fee Structure
  • 🎢Trade on OptiFi
    • Paper trade on Devnet
    • Trade on Mainnet
  • 🔐Security
    • Audit Report
  • 🏗️Build on OptiFi
    • TypeScript SDK
    • Rust Dev Tooling
  • 📚Option 101
    • Glossary
      • Basics
      • Greeks
      • Hedge
  • 💜OptiFi Community
    • Designer Guideline
    • Discord
  • Website
  • Twitter
  • Medium
Powered by GitBook
On this page
  1. OptiFi in Depth
  2. OptiFi Market Maker (OMM)

Delta-Neutral Hedging

PreviousOMM Orderbook PricingNextContinuous Functioning of OMM

Last updated 2 years ago

This section illustrates how OptiFi Market Maker (OMM) achieves .

Take a BTC Option Vault as an example:

  1. Orderbook Management: Dynamically update based on delta level

    • When OMM is overexposed, Delta > 0, it will reduce the amount of BTC options it is willing to buy calls (or sell puts)

    • When OMM is underexposed, Delta < 0, it will reduce the amount of BTC options it is willing to sell calls (or buy puts)

  2. Risk Management: Use Futures to hedge

    Once Delta Mismatch occurs, OMM will automatically hedge the whole portfolio through Futures Market, to make sure the delta is under a manageable level at nearly to zero.

This way, OMM will:

  • Provide better than mid-price buy sell prices when it needs to source delta hedges

  • Create more competitive pricing and attract liquidity to the futures market as well as help balance flows between options and futures

🎯
Delta-Neutral
orderbook pricing
Mango