Premia Finance

Overview

Premia's automated options market enables best-in-class pricing based on realtime supply and demand, bringing fully-featured peer-to-pool trading and capital efficiency to DeFi options.

The key problems Premia solves compared to other options protocols:‌

• Market driven option pricing

• Capital efficient pool-to-peer architecture

• Optimal liquidity pool utilization

• Risk management and instant withdrawals for liquidity providers

Key Premia innovations:‌

• Market driven options pricing - Each pool on Premia takes into account the relative supply and demand of capital within that pool to ensure a market-clearing options price is reached. This ensures optimal pool utilization at fair prices.

• Liquidity sensitive returns to LPs - Returns on liquidity (options premiums) are priced according to the supply/demand of capital in each pool. Larger demand means higher option prices, which translates to greater returns for LPs.

• Granular liquidity provision - LPs have control over which markets they underwrite, as opposed to underwriting the entire volatility market. LPs can implement customized strategies to granularly provision their liquidity only to the pools (and options) they desire.

• Self-incentivizing initial liquidity - The automated pool pricing mechanism incentivizes liquidity providers to enter a pool from the time it's launched, to get the highest returns. This ensures lower slippage by the time the first options are bought from the pool.

• Dynamic Premia token rewards - Liquidity providers and PREMIA stakers accrue PREMIA tokens over time through our Liquidity Mining program and xPREMIA system, respectively. The amount rewarded depends on the size of their position and the length of the deposit (additionally, the amount of protocol fees generated determines the total size of rewards for PREMIA stakers).

The Basics

Premia is a decentralized options market based on a pool-to-peer architecture, similar to Uniswap or SushiSwap, but for options.

Users can purchase American-style options on Premia’s best-in-class AMM by first selecting the details of the option they'd like to trade, like the token pair, strike price, and maturity. Once the details have been entered, the user will receive a quote denoted in terms of the underlying asset for call options or the base asset for put options. If the user agrees with the price, they can execute the transaction to facilitate the trade and purchase the option for the quoted price.

Users can purchase options with any asset (so long as their is DEX liquidity available). If users purchase an option with an asset other than the default payment token, the user's asset will be swapped to the payment token on the DEX with the best price before purchasing the option. This is done in a single transaction to ensure the best user experience.

All of the liquidity (capital) in the pools for trading options is provided by other users of the protocol called Liquidity Providers (LPs). When a trader purchases an option, another user, who has previously provided capital to the pool (an LP), simultaneously underwrites the option to the buyer. All options on Premia are fully collateralized, meaning the underwriters' tokens are locked in the option from purchase until settlement, to ensure the full exercise value of an option can always be paid out to option holders.

Options on Premia can be exercised at any time before or after the option's expiration.

After an option's expiration, the option's value will be locked to the option's value at the time of expiration. When an option is exercised, the exercise reward is sent to the option holder and the remaining collateral is sent back to the LP's free capital pool, making it again available to be used again to underwrite future options or be withdrawn by the depositor (along with the premiums earned from selling the option).

Liquidity providers on Premia can take advantage of market-competitive yields from option premiums, in addition to Premia rewards from our Liquidity Mining program. This allows for traders to enjoy the best possible prices and trading experience, ensuring a consistent stream of volume and returns for LPs and PREMIA stakers.

The options trading service provided by Premia is not only the state-of-the-art tool to hedge your spot or futures positions, but also a way to potentially benefit from options speculation. Market-driven options pricing takes into account the relative supply and demand of capital within a pool to reach a market-clearing options price. This provides optimal pool utilization at fair prices.

In addition to market pricing, the three key problems Premia solves versus other options protocols are:‌

• capital efficient pool-to-peer architecture;

• optimal liquidity pool utilization;

• risk management and instant withdrawals for liquidity providers.

If you are a FTM holder looking for passive income, welcome to the Premia Pools which allow you to become a liquidity provider with your FTM tokens (or ETH, WBTC, YFI) and earn yield.

Premia utilizes self-incentivizing initial liquidity — an automated pool pricing mechanism that incentivizes liquidity providers to enter a pool from the time it is launched — in order to get higher returns. This provides much lower slippage once the first options are bought from the pool.

Simply add your tokens to the Premia Pools and get started earning passive income!