Float Capital is launching an Olympus synthetic market, providing another diversification option for all OHM holders and giving Ohmies new strategies for interacting with OHM.
The market goes live on Tuesday, the 2nd of November, at 10:00am EST. If you’re reading this after that, you can trade here.
Whether you’re an Ohmie, one of the Float Capital degen traders, or someone new to both protocols, you’re in for a treat. Here’s why it matters, and how you can get diversified exposure to OHM:
Now users can get exposure to OHM on Polygon, which offers lightning-fast speeds and lower transaction costs. For example, trading with Float Capital generally requires paying ~0.015 MATIC per transaction, or roughly $0.02.
The Float Capital OHM market will launch with a 2x leverage, meaning your exposure to price movement will be doubled.
For example, say you have a long position in a perfectly balanced market with 100% exposure in Float, and the price goes up by 10%. That will result in a 20% gain on your position.
Now say you’re staking $100 of OHM, and you want to open a short position to completely remove your exposure to price movements. In a 1x leveraged market, you would need to put down a full $100. In a 2x leveraged market, with 100% exposure you can fully hedge your position with just $50, or half the position you want to hedge.
Way more on this below.
If you’re new to Polygon, you can bridge your tokens across here.
Here’s the really cool part:
The Float Capital OHM market is enabling a whole new trading strategy for OHM stakers.
Previously, Ohmies have only had the option of staking, bonding, or, much worse, selling. But selling isn’t very (3,3) of you.
The Float Capital OHM market opens up the possibility of a new strategy that doesn’t undermine the game theory inherent to the Olympus community: going delta neutral.
This means, in addition to your OHM stake, you can hold a short position on OHM to reduce your exposure to market volatility.
This will allow users to keep earning rewards for staking OHM, hedge against downward movements in the market, and earn FLT tokens from Float’s own staking incentives.
Currently FLT is in its alpha phase, so users will earn alphaFLT when staking in Float. When FLT launches around the end of 2021, alphaFLT will be taken off the market and current holders of the token will be rewarded.
A delta neutral strategy is equivalent to having zero exposure to the price of the underlying asset, in this case the OHM token. This means having 100% exposure to the price going up (long) and having 100% exposure to the price going down (short), simultaneously.
This allows APY returns without being exposed to the price movements of the OHM token. It’s a risk averse strategy for farming rewards.
Because the exposure in our markets ‘floats’ based on the balance of capital in each market, hedging your OHM position isn’t as simple as putting in 100% of your OHM position to get 100% hedging.
To understand this, head over to the market and check the exposure.
To explain exposure, we’ll use an example:
Let’s say Nachos has $1,000 of OHM tokens staked. This equates to 100% exposure to $1,000 of value. In order to get a delta neutral position he will need to get $1,000 value of short exposure.
Nachos would head over to Float Capital and check the exposure on the short side of the OHM market.
If that exposure is 100%, then in a 2x leveraged market, he will be able to fully hedge his position with only a $500 short position.
If the exposure is lower, say that it’s 50%, then since it’s a 2x leverage market, Nachos would go $1,000 short to get $1,000 short value exposure.
To make it easier to process, we’ve built a calculator for you in this google sheet. Just make a copy and punch in your OHM stake.
If you’re old school and have a calculator handy, here’s the math:
Firstly we start with
- The dollar value of your OHM position ($OhmStake)
- The short exposure on the OHM 2x Leverage market on Float Capital (%ShortExposure)
And we calculate for:
- Dollar amount to go short in OHM market on Float Capital ($FloatPosition)
That works out to:
$FloatPosition = $OhmStake / (2 * %ShortExposure)
You can see the math in more detail here.
Once you’ve got your calculation ready, make sure that you have enough DAI in your wallet to cover that position in Float.
When you’ve done that, head across and stake your short here. You’ll get the hedge you want with all the benefits of your OHM stake, and the added benefits from the Float protocol rewards system.
Just remember – in Float Capital, your leveraged exposure floats. This means that the position needed to hedge may change as the price of OHM changes and the market shifts.
To keep your hedge you will need to check in regularly and recalculate.
The Float Capital OHM synth will be powered by market data supplied by a Chainlink Price Feed on the Polygon network. Each Chainlink feed draws data from a decentralized network of secure oracle nodes, each of which aggregate data from multiple premium data providers with wide market coverage.
By using a Chainlink Price Feed we ensure reliable and regular access to price data that helps protects our traders from attacks, and makes sure that the market is safe and that the movements of capital within the market accurately reflect the price of the underlying asset.
If you want to learn more about how Float integrates Chainlink feeds, click here.
Float Capital is a yield enhanced synthetic asset protocol that allows users to mint assets in a matter of clicks, without the need for over collateralisation or the risk of liquidation.
OlympusDAO aims to create a free-floating financial reserve backed by a basket of assets. By focusing on supply growth rather than price appreciation, OlympusDAO hopes that OHM, the protocol’s token, can function as a reserve asset that is able to hold its purchasing power regardless of market volatility.
Chainlink is the industry standard for building, accessing, and selling oracle services needed to power hybrid smart contracts on any blockchain. Learn more about Chainlink by visiting chain.link or read the documentation at docs.chain.link. To discuss an integration, reach out to an expert.
This piece isn’t financial advice. Trading carries risks and should be taken seriously. If you want to be more informed about the risks of trading with Float Capital, read more here.
If you’re a seasoned investor doing due diligence on the protocol, or a Web3 newcomer just starting out, hop over to our Discord, and meet the team here.