Delta-Neutral Hedging

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

Take a BTC Option Vault as an example:

1. 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)

2. 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