Options for liquid staking tokens at Polygon: What is it, How does it work, and How to maximize profit from staking MATIC
What is it?
The innovative mechanism for generating “organic” yield at DeFi layer by layer, brick by brick. Polygon+Stader labs’ liquid staking token+ deltatheta options=DeFi Lego at maximal efficiency. But let’s explore this construction in more detail step by step.
According to their site, Polygon is a decentralized Ethereum scaling platform that enables developers to build scalable user-friendly dApps with low transaction fees and without ever sacrificing security. The platform generally includes several modules which allow users to explore the Blockchain Magic of Decentralisation from various points.
Polygon Proof-of-Stake is a solution that achieves unprecedented transaction speed and cost savings by utilizing side-chains for transaction processing. At the same time, POS ensures asset security using the robust Plasma bridging framework and a decentralized network of Proof-of-Stake (PoS) validators.
Validators lock MATIC tokens for verifying the authenticity and validity of transactions within the network and are rewarded in return. More details can be found on the official blog.
When validators and their clients stake MATIC, their liquidity stays frozen. The solution from Stader labs allows users to mint a new token representing the staked Matic — MaticX, and use it in various DeFi protocols. All that time, profit from staking (+9% APY) accrues to MaticX and is ready for receiving at unstaking or by swapping on a DEX.
Manual on how to use Stader dApp and MaticX can be accessed here.
More details about staking MaticX at Polygon are placed on Stader Labs Blog.
The power of options
As you know, options are a contract where there is a buyer and a seller. The buyer of options always pays a premium to the seller and has the right to exercise the option. The buyer wants to be able to buy or sell something at a fixed price up to a certain point in the future. On the other hand, the seller bets that the event will not occur and receives a premium for this.
Now that we are in a bearish trend, options trading is becoming a unique alternative to staking. Since by selling options, you get a premium in stablecoin immediately. Most traders prefer to sell CALL options on MATIC with strikes (price) above the market by 20–30% and earn 20–30% APY on this.
The uniqueness of the Stader Labs and deltatheta solution is that you earn twice:
- Staking rewards with MaticX
- Premium from selling call options on MaticX
And this can bring you more than 50% APY.
How to trade options on MaticX
- First of all, buy Matic at Polygon,
- Next, go to Stader labs dAPP, stake Matic, and receive MaticX,
- Go to the delta.theta terminal and open a limit order for CALL options selling or take existing orders.
The recommended strategy for newbies
The basic idea is to sell CALL options that will not be in the money. That is, the price of MaticX will not exceed the reference price or strike. The term of the options is one week. MM on deltatheta constantly quotes the necessary strikes. You can ask any questions in deltatheta OTC chat → https://t.me/deltatheta_TradingGroup
- Spent 74$ for 100 Matic
- Stake 100 Matic at Stader APP and received 97.7MaticX
- Open delta.theta terminal and create a limit order (find how to do it in our blog)
- Choose the date — for example, 05 Aug, strike 1USD, premia 0.01 per 1 MaticX
The Final Profit will consist of:
APY= (0.246Matic +0.9DAI)*(365/10)=9 Matic +32.85DAI
If 1Matic cost 0.74$ (today’s entering price) Final APY will be around 39.51$/74$=53%
Options and FOMO
It should be noted that as a seller of CALL options, you can meet the FOMO situation. Because if you CALL options seller, it is equal to placing a limit market order for selling of an asset. Your options will be exercised if your order was taken and the price exceeds strike. For example, you sold CALL options on MaticX with a strike price of 1.0 DAI. In the next few days, the price reached 1.2DAI, and your options were exercised. So you get only 1.0 DAI, not 1.2 DAI. So, this is FOMO.