Introducing first ZEPO: pre-market for $BAL token is live!

Andrey Belyakov
Jun 8 · 5 min read

Pre-trade on any market with ZEPO via Opium Exchange

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In short: ZEPO is an option that replicates an asset; we have launched ZEPO trading for $BAL token, $COMP token is coming, stay tuned… And don’t forget to drop an order for $BAL at attractive price>>

Understanding ZEPO

ZEPO is a call option with the strike price set at zero. The coolest feature is that it replicates the price of underlying asset.

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The underlying of this option is typically a non-marketable asset or an asset with no deep secondary market. Historically, it is popular in countries where there may be obstacles to the transfer of securities, especially stock.

The holder of the option will have full participation in the underlying price in an indirect way. The purchaser of the option will definitely exercise it, so it is the same as owning the underlying asset. The seller has full offsetting participation in the stock price, that is equal to a short position.

ZEPO is a call option with the strike price set at zero. The coolest feature is that it replicates the price of underlying asset.

Creating a pre-market

As a buyer of ZEPO, I will receive a market price at maturity, so if I can buy it cheaper now, I am making a profit. As a seller of ZEPO, I will pay a market price at maturity, so if I can sell ZEPO more expensive now, I will make a profit.

We were inspired by the community to introduce ZEPO pre-markets to DeFi. As usual, it took some hours to list a new derivative on Opium Exchange. Have an idea about next listing? Let us know!

Lets look at example of our ZEPO for $BAL token:

We define market price as Uniswap price if listed or 0.6 DAI otherwise.

Alice believes that the market price of $BAL will be 1 DAI on the contract’s maturity date, and therefore ZEPO brings her 1 DAI at maturity. In this case, she is happy to buy it now at a price lower than 1 DAI. Bob believes that the market price of $BAL will be 0.5 DAI at maturity. He is happy to sell ZEPO for more than 0.5 DAI now.

Alice and Bob can send their orders to Opium Exchange platform and let’s suppose they meet at 0.7 DAI. This price will be paid from Alice to Bob immediately. At the same time, the initial margin will be locked from Bob’s account for ZEPO creation.

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How to trade

Opium Exchange is non-custodial platform and not a liquidity provider. However, there are some market-makers and liquidity providers already working with our APIs.

  1. You can place your buy/sell order with the price limit.
  2. Your order will proceed to the matching layer — order books that run on meta-transactions. You may specify an expiry time of your order after which it can not be matched and settled on the blockchain.
  3. You can always cancel your order if it is not matched.
  4. Once settled, your derivative positions are transferable/tradable via ERC-721o. You can keep it in a cold wallet, trade on secondary market or send it to someone.
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You can find Opium Exchange manual here or read about Opium Protocol here.

Important information, keep in mind:

  • ZEPO payout is capped by the initial margin of a seller, at the current contract is set to 2 DAI per BAL. Because there is no secondary market, yet it is challenging to evaluate the adequate amount of initial margin. We will carefully monitor the feedback of users and will list contracts with different margin requirements if needed.
  • Every current contract covers 10 BAL. For example, if you trade 100 ZEPO contracts, you are exposed to 10*100=1000 BAL at maturity. If you sell ten contracts an initial margin of 10*10*2=200 DAI will be locked from your account.

Every current contract covers 10 BAL. For example, if you trade 100 ZEPO contracts, you are exposed to 10*100=1000 BAL at maturity.

  • If there is no market at the maturity date, the oracle price will report 0.6 DAI (the price at the initial offering). So keep this in mind, it can be a risk or an opportunity to make a bet on the absence of Uniswap market at maturity.
  • Opium.Exchange is a software platform that provides access to open-source Opium Protocol. Always check your local regulations.

About Opium

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Andrey Belyakov is a member of the CFA Institute, a professional derivative trader and fund manager with ten years of experience with 30 billion EUR AUM portfolios. He is the founder of the Opium Team, The Art Exchange, and a private venture investor. Earlier, during his mathematical career, Andrey was working on Queue Theory for large distributed systems and Theory of Probabilities in Moscow State University.

Opium Team is a small team of professional traders, mathematicians and programmers with a ton of experience in their field. Big parts of economies are in hands of centralized agents that exploit their positions. We are convinced that they are not necessary any longer. We designed the Opium Protocol to ensure transparent, fair and open financial markets.

Feel free to drop us any questions or your feedback in Opium Telegram group. Chat us also if you need help with building derivatives on top of Opium Protocol.

Stay tuned and follow Opium on Twitter

Opium Team

Opium Protocol is the universal protocol to create, settle…

Thanks to Nick Sawinyh

Andrey Belyakov

Written by

Opium Protocol, The Art Exchange

Opium Team

Opium Protocol is the universal protocol to create, settle and trade virtually all derivatives in a trustless way.

Andrey Belyakov

Written by

Opium Protocol, The Art Exchange

Opium Team

Opium Protocol is the universal protocol to create, settle and trade virtually all derivatives in a trustless way.

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