The future of volatility trading
Welcome to GammaSwap - the future of volatility trading. We are an intermediary liquidity pool that allows trading volatility using UniSwap. The application is powered through smart contracts that implement pools of tokens where traders could swap their tokens.
Currently, UniSwap users cannot buy volatility, because users are only able to deposit ETH-based funds and take what they have previously deposited. There is no way to borrow liquidity from the existing pool.
GammaSwap's value is to allow traders to buy volatility from Uniswap. This would be achieved by using the GammaSwap pool (GSP). In short, liquidity lenders will provide liquidity to Uniswap via GSP.
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Liquidity pools are dependent on liquidity providers who fund the pools, and in return they earn a yield for lending their funds. However, liquidity providers are exposed to volatility risk, aka impermanent loss.
Impermanent loss is equivalent to the returns of a short straddle, an options strategy comprised of selling both a call option and a put option with the same strike price and expiration date.
Providing liquidity is equivalent to selling volatility which means they are short gamma. Implied volatility is the market's expectation of volatility derived from option prices, and in DeFi space, it will be UniSwap fees.
The future of volatility exchange. Uniswap has without a doubt transformed DeFi by pioneering decentralized large volume trading without an intermediary. This is done via smart contracts that implement liquidity pools where traders can swap their tokens. Historical volatility is what the volatility actually was.
A preferred trading strategy is to provide liquidity or sell volatility when implied volatility < historical volatility (meaning that prices are relatively stable) and to buy volatility in the opposite situation.
The graph shows implied volatility in yellow and historical volatility in blue. For the past year, it would have been a good strategy to buy volatility. Their liquidity is stored in the GSP reserves for borrowers to buy. Lenders get an additional premium for lending their liquidity to borrowers. From the borrowers' point of view, using collateral, they can borrow liquidity from GSP that is in the pool and pay it back later when the prices swing in their direction. They also need to pay an interest to the lender to borrow their liquidity and lenders can earn more interest than if they used Uniswap alone.
positionManager.address=0xC6CB7f8c046756Bd33ad6b322a3b88B0CA9ceC1b depositPool.address=0x3eFadc5E507bbdA54dDb4C290cc3058DA8163152