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GEE-yohm LAMB-bear
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Founder and CEO at @Panoptic_xyz. Left-handed shortstop.
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GEE-yohm LAMB-bear
02-14
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Now that this challenge has concluded, here's how to frame this challenge under the view that LP positions = options (& why LVR/edge benchmark is not what real traders worry about): - You sell a straddle, hedging the delta after each spot price move. The edge benchmark is measuring the theta minus gamma-bleed. The basic assumption from LVR is that you need to hedge after every trade, so the best performing hooks want to limit trades getting to the AMM to only those coming from benign/non-arbitrage flow. But hedging after every trade is one extreme end of the spectrum. The other end is not hedging at all, and the "final" loss is IL when the position is closed: |---------------------| 𝙻𝚅𝚁 𝙸𝙻 𝚑𝚎𝚍𝚐𝚎 𝚊𝚏𝚝𝚎𝚛 𝚍𝚘𝚗'𝚝 𝚎𝚟𝚎𝚛𝚢 𝚝𝚛𝚊𝚍𝚎 𝚑𝚎𝚍𝚐𝚎 Most funds would never hedge after every trade, not even Citadel or other HFT firms doing cross-arbitrage between very similar products like SPX, SPY, and /ES. So constraining the solution space to everytrade/LVR misses how real funds handle risk. Somewhere between LVR and IL is where most funds need to manage risk, leading to more elegant mechanism designs for better AMMs: - hedge at fixed time intervals (markouts) - hedge at fixed delta (reverse gamma scalping) - hedge before every trade (propAMMs) - hedge with TradFi vs. perpetual options - hedging dynamics when LPs are arbitrageurs, arbitrageurs are LPs twitter.com/guil_lambert/statu...
THETA
8.05%
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GEE-yohm LAMB-bear
01-08
Applying this to AMM LP positions: Fees collected on a LP position *is always* and everywhere compensation for the expected losses from negative gamma The *is always* part relies on the market to make it happen. This structurally can't happens when LPing directly in an AMM. - Options premium & theta decay are too low? No problem, just buy that option and collect those positive gamma gainz. - Fees in that AMM are too low? Too bad, best you can do it to pull liquidity. BUT, the same LP positions deployed on Panoptic *can be shorted*. This means low fees are a signal that IV is repressed, which directly lead to higher expected returns from that positive gamma exposure. Cheap convexity is terrible for LPs, but it's great for options buyers.
Benn Eifert
@bennpeifert
01-08
Say it with me: Theta decay on a short option position is always and everywhere compensation for expected losses from negative gamma (and for losses on other even worse scary things!) x.com/bennpeifert/st…
GAMMA
0%
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GEE-yohm LAMB-bear
12-21
My predictions for the UNIfication proposal, once activated: - Uni v3 pools become unprofitable despite the FPDA, LPs migrate to Uni v4 - some LPs leave the Uniswap ecosystem entirely, net TVL goes down - fees collected on v3 compress to zero, with some coming from v2 Scenario A: Uniswap does nothing, the fee switch returns are abysmal, LP are more unprofitable than before, tvl and activity decrease, Uniswap/UniswapX becomes a routing layer with no native LP liquidity. Scenario B: - Feeling the pressure, the fee switch is turned on for v4 pools and $UNI tokens are aggressively distributed as incentives - LPs auto sell $UNI or become the only actor that can profitably call release() in the FirePit bc their $UNI cost basis is zero - value generated by the fee switch ≈ value of $UNI incentives distributed (unless a non-circular mechanism is introduced) - $UNI becomes a governance-directed rebate token for LPs, with unclear benefit to passive token holders LP profitability (or lack thereof) is more than a meme. I have been an LP for years and I’m building a protocol focused entirely on LP tooling to increase profitability. I am not entirely sure either outcome is what’s best for LPs.
UNI
2.27%
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