Delta-Neutral Hedging
This section illustrates how OptiFi Market Maker (OMM) achieves Delta-Neutral.
Take a BTC Option Vault as an example:
Orderbook Management: Dynamically update orderbook pricing 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)
Risk Management: Use Futures to hedge
Once Delta Mismatch occurs, OMM will automatically hedge the whole portfolio through Mango 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
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