General Flow
Information outlining how option pools works under the hood
The dopex protocol consists of a number of moving parts to provide a liquid, well incentivized platform replicating successful option platforms such as Deribit and Robinhood with it's own AMM.
The dopex AMM uses assets from the asset pools along with Black-Scholes pricing (powered with SVI IV params from our partnered option MMs) accounting for volatility smiles to allow anyone to purchase options based on strikes of their choice for future expiries.
Dopex makes use of weekly "epochs" globally for accounting assets, option flows and reward/rebate distribution of the DPX and rDPX token as incentives for providing liquidity to the platform. Option pools within the protocol may have weekly or monthly epochs.
A factory contract is used to create and whitelist new option pools, this is initially controlled by the Dopex team and eventually control will be handed over to the Governance contract.
DPX token rewards and rDPX rebates are distributed relative to assets locked within all whitelisted option pools.
Anyone can become a liquidity provider by adding base or quote assets to option and liquidity pools.
Funds locked in the volume pool prior to an epoch may be used to purchase options from the option pool based at a 5% discount. This can be instantly hedged and/or arb-ed on other exchanges for an instant profit.
After an epoch begins, users can purchase options for future expiries whenever they'd like based on assets available in the option pool. The cost of options purchased is calculated on-chain based on the Black-Scholes formula - using IV and asset prices retrieved via Chainlink adapters - and passed through a function to determine volatility smiles based on realized volatility of the asset.
Liquidity providers for both option and liquidity pools can always create withdrawal requests to withdraw their share of the pool after the current epoch.
At the end of an epoch, based on the total number of quote tokens collected from option purchases along with option exercises, the total PNL for an epoch is calculated. If the PNL for the epoch is in loss, users will be rebated a % of their losses with rDPX tokens. This % is can be changed in the contract via governance.
Accounting for option exercises and withdrawal requests, quote tokens collected during the epoch are used to re-purchase assets in case of calls and are locked back into option pools for the next epoch.
Withdrawal requests from the previous epoch can now be withdrawn based on net PNL accrued during the users' deposit lifetime in the pool.
Based on a liquidity providers' contribution to a pool for the previous epoch, they would now be rewarded with DPX tokens based on the rewards table displayed below.
DPX and rDPX tokens retrieved here can be used for various purposes. Read more about the tokens in the tokenomics page.
Option Swapping
Dopex offers a one of a kind feature which allows users to swap their options for a different expiry and/or strike price. This allows users to swap their options without worrying about the current liquidity for their options in the market as the swap is done via changing the collateral locked in the option pools. Swapping follows the following formula:
C / N
C - Total options value of the options to be swapped
N - Option price of the new options (with new strike and/or expiry)
Rewards
DPX Rewards are split into 2 categories:
- Function call rewards - Distributed to reward users for gas costs made for essential function calls
- Action rewards - Distributed to rewards users for adding liquidity to option/volume pools
Reward percentages are as listed below,
Call rewards
Rewards based on a percentage of the total token rewards to be emitted for the current epoch.
Function call
Percentage
Bootstrapping option pool
0.7%
Expiring epoch
0.3%
Action rewards
Rewards based on actions taken within the protocol. These are a % of all token rewards for an epoch after distributing function call rewards.
Action
Percentage
Add to option pool
75%
Add to volume pool
25%
Rebates
rDPX is distributed as rebate tokens to the option pool participants in case of an epoch resulting in net losses for a pool.
Rebates are calculated based on total value of assets in USD along with premiums collected after an epoch versus total value of assets in USD before the epoch. Rebate tokens are minted based on the current TWAP of rDPX on Uniswap. The percentage of rebate can be changed via a governance proposal.
Rebate
Percentage
Loss Rebate
30%
Fees
Fees are collected by the platform which are moved to a vault where other users can stake their DPX to collect these fees. There is a fee for option purchasing, swapping and exercising.
Name
Amount
Option Purchase
0.02% of the underlying asset (Capped at 10% of the total options value)
Option Swap
0.03% of the underlying asset (Capped at 10% of the total options value)
Option Exercise
0.01% of the underlying asset (Capped at 10% of the total options value)
Fees Distribution:
- 70% to back to depositors (Option Pool liquidity provider)
- 5% to Delegates (SVI proposers)
- 5% to rDPX Burning
- 15% to Governance Staking
The fee structure can be changed and controlled via governance.
Last modified 1mo ago
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