This solution will provide unprecedented flexibility, with expiration durations ranging from as short as one hour to as long as 24 hours.
PancakeSwap, a decentralized exchange platform, has partnered with Stryke (formerly known as Dopex) to introduce a new project in the decentralized finance (DeFi) space: CLAMM Options Trading. This project will enable traders to now trade options, build on-chain options liquidity, earn premiums, and earn swap fees.
This partnership introduces American-style CLAMM options, which will debut on the Arbitrum blockchain. This solution will provide unprecedented flexibility, with expiration durations ranging from as short as one hour to as long as 24 hours. The initial markets will include ARB/USDC, WETH/USDC, and WBTC/USDC pairs, catering to a diverse range of traders and investors.
Options are derivative contracts that grant buyers the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specific expiration date. Buyers pay a premium for this privilege, thereby limiting their potential losses to the premium paid if market conditions are unfavorable.
Option contracts can be divided into two main types: call options and put options. A call option lets the buyer buy an asset at a specific price, called the strike price. On the other hand, a put option gives the buyer the ability to sell the asset at the strike price.
More on the CLAMM Protocol
The exchange further revealed the CLAMM liquidity process and how it will be done, stating that when adding liquidity to CLAMM options, users simultaneously contribute to PancakeSwap’s v3 (CLAMM) pool. This facilitates trading by allowing liquidity extraction from the v3 pool when someone buys options. The liquidity provider then becomes the options seller, receiving a premium.
Any unused liquidity remains in the PancakeSwap v3 pool, potentially earning trading fees if the pool price stays within the specified range. Selling options and providing v3 liquidity share the same payoff structure, so users don’t face increased risk compared to traditional liquidity addition methods. The balance of tokens, or initial liquidity, remains consistent. Users face minimal risks as unutilized liquidity may occur if options buying demand is low, or liquidity sits in inactive ranges without generating fees. Overall, the system efficiently manages liquidity for options trading.
In a post by Stryke, which further establishes the benefits of the new project to its users, this latest development will provide PancakeSwap users with direct access to their CLAMM product. Moreover, existing users of the platform have the opportunity to gain deeper liquidity by selecting PancakeSwap as the underlying DEX.
⚡Stryke integrates with @PancakeSwap
This provides PancakeSwap users with direct access to our CLAMM product on an interface they are familiar with. Existing Stryke users gain deeper liquidity by selecting PancakeSwap as the underlying DEX.
Try it here:… pic.twitter.com/WXbws3hZK7
— Stryke ⚡ (@stryke_xyz) April 8, 2024
PancakeSwap’s Version 4 to Be Released This Year
This new project follows the recent announcement by the exchange platform regarding the release of its PancakeSwap’s version 4, which is slated to be released later this year. The yet-to-be-released version will be embedded with features such as hooks, custom pool types, singleton, and flash accounting, which will have an effect on on-chain trading. The aim is to make on-chain trading cheaper and more efficient for users.
Aside from that, the upcoming version will be available on the Ethereum and BNB Chain networks in the third quarter, offering improved pricing of listed assets, reduced gas consumption, and lower deployment costs.
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