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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On this page
  • Portfolio management
  • Hedging Impermanent loss
  • Hedging against loan liquidations
  • Hedging value of metaverse and NFT assets
  • And many others :)
  1. Usage

For Hedging

Explore the power of Carmine Options in mitigating portfolio risk through diverse hedging strategies using call and put options.

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Last updated 1 year ago

Portfolio management

In the realm of stocks, and naturally crypto as well, market downturns often result in increased volatility. For users with a long portfolio, this volatility can be hedged using various strategies. These include going long on volatility across multiple instruments, such as implementing a long straddle through options, or purchasing long put options with far-off strike prices. These approaches serve to reduce portfolio risk and mitigate potential value drops.

Hedging Altcoin Portfolio with ETH: Suppose your portfolio is heavily composed of altcoins that are positively correlated with Ethereum (ETH). If you're concerned about a potential market downturn affecting these altcoins, you could buy put options on ETH. In case of a market downturn, the increase in the value of your ETH put options can help mitigate the losses from your altcoin portfolio.

Hedging Impermanent loss

Impermanent Loss (IL) is a potential risk that liquidity providers (LPs) face when the price of tokens within a pool changes. LPs earn profit when trading fees outweigh losses from IL. Thankfully, IL can be mitigated using options.

For more information, refer to .

We believe that this will turn out to be a core usecase of the AMM and we're building this functionality for the AMM as you read this. You will be able to hedge your LP position with one click.

With options, we can build the features formerly provided by specialized niche AMMs such as GammaSwap in the DeFi way: composable, transparent, understandable building blocks.

Hedging against loan liquidations

Let's say you use a lending platform such as Aave or Nostra and have supplied ETH as collateral. If its price drops significantly, you will be subject to liquidation. To protect against this, you can buy put options on ETH. If ETH price falls, the value of the put options will rise, providing a hedge against the decreasing collateral value.

We are exploring partnerships with lending platforms and are planning on building this functionality right into the lending platforms.

Hedging value of metaverse and NFT assets

Metaverse assets such as land plots and so on can have their value hedged to protect against the price fluctuations. Same for NFTs.

Description is under construction

And many others :)

Hedging Impermanent Loss