Quick Update on DeFi Options

It’s been several months since we took a broad look at the DeFi options space. Here is a brief update on some projects with strong momentum:

Lyra – Lyra revitalized DeFi options with its Avalon update in June 2022, and has remained the DeFi options leader by a comfortable margin since. Avalon’s key features included delta hedged LP pools, much better selection of strikes and expiries, and partially collateralized short selling. From a feature perspective, Avalon put Lyra two steps ahead of its competitors Premia, Hegic, and Dopex.

Lyra’s Newport update helps to shed Lyra’s dependence on Optimism/Synthetix/sUSD by deploying on Arbitrum and collateralizing options with cash, delta hedging with perps via GMX. This allows Lyra to be partially collateralized with about 70-80% of OI in cash. Newport will soon be launched on Optimism as well, integrating with Synthetix perps v2 for delta hedging.

Premia – Premia v2 showed signs of success from the trading side. Premia was able to offer competitive prices for American options which was particularly powerful given the variance fees and liquidity issues suffered by Lyra users when selling ITM options back to the AMM.

Premia began to fall behind Lyra even before the Avalon update, struggling to bootstrap liquidity for its asset specific buy/sell call/put liquidity pools.

Premia v3 is scheduled to launch on Arbitrum in the summer. It will feature a fully collateralized exchange layer, a margin system, and a vault layer. Premia v3 can best be summarized as Uniswap v3 for options, with an RFQ system and vaults combined into an aggregated order book.

Aevo/Ribbon – Aevo is a high performance orderbook built on its own app-specific rollup on the OP stack (similar to Coinbase’s BASE). Aevo just launched on testnet, and access is gated. There is limited data available.

Aevo will be the settlement layer for Ribbon’s DOVs, allowing users to trade and exit their vault positions on the Aevo orderbook. Ribbon will onboard retail liquidity to Aevo, similarly to the vault layer’s role on Premia v3. Aevo will allow for more composability and sophisticated vault strategies on Ribbon. For more on Aevo, check out our recent report.

Rysk – Rysk’s primary product is a dynamic hedging vault (DHV). Rysk has a robust options DEX in development called Rysk Beyond, but full details are not yet available. Rysk’s core product is providing uncorrelated returns to users. Rysk is currently in an Alpha phase, and is currently accepting sign ups for a trading competition in collaboration with GammaSwap.

This is by no means an exhaustive list. We expect perpetual options to have a big year (more on these soon). Additionally, established projects such as Dopex, Hegic, and Zeta are still building, and many new options projects are emerging that are a bit early.

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