Carmine Options AMM
  • Intro
  • What we are aiming for
  • Audit
  • Carmine Academy
  • How to use the app
  • Use cases
  • Organization
    • Team
  • Mechanics - Basic Overview
    • Liquidity Pools
    • Initialization of new pairs and new options
    • Price Adjustments
    • Examples
  • Tokenomics
    • Tokenomics
    • Token Allocation
    • Distribution of Fees
    • Voting about Treasury and community projects
  • Usage
    • For Hedging
    • For Speculation
    • For Trading
    • Arbitraging the AMM
    • Future Use Cases Unlocked by the Composability of DeFi
      • Hedging Impermanent Loss
  • Mechanics - Deeper Look
    • Option Pricing Mechanics
    • Fees
    • Volatility Updates
    • Slippage
  • Tech docs
    • Mainnet addresses
    • Smart Contract Architecture
    • Deprecated Smart Contract v1 Endpoints
    • Smart Contract v2 Endpoints
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  1. Mechanics - Basic Overview

Initialization of new pairs and new options

Initialization of options trading

Introducing new underlying assets and options to Carmine Options AMM is a community-led process. It begins with the creation of governance proposals, followed by Carmine token holders casting their votes on these proposals. If the community gives the green light, we roll out the proposal and trading (along with staking) kicks off immediately.

Now, when we're launching new options, we need to set a few parameters upfront. The strike price, maturity, and risk-free rate are all nailed down right at the start. The price of the underlying asset, on the other hand, gets pulled from an AMM/oracle source that needs to be chosen.

As for the initial volatility, that's in the hands of the token holders. They pick an initial value which gets put up for vote. If the community is onboard, trading starts with this agreed-upon volatility. But here's the cool part - as people buy and sell, this volatility figure gets updated.

One thing to note when drafting a proposal: it's smart to manually or automatically check out the initial volatility against similar options on other exchanges and protocols. Why? Because it gives us a starting point that's as efficient as possible. It's all about hitting the ground running.

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Last updated 1 year ago