Predy Finance Releases V3 with Perpetual Options (LIVE on TESTNET)

In the wake of an imploding crypto scene, DEX Predy Finance has reworked its revolutionary V2 app — which included portfolio Margins, hedging against impermanent losses, unlimited upsides on long power perpetuals, and other wonderful things — and has now launched V3!

Predy V3 introduces perpetual options. It also provides a more advanced AMM than Uniswap (but which is based on Uniswap), with value preservation being done by Uniswap’s LPT.

In this blog, we’re going to use Call Options to illustrate how Predy V3 works.

But first, let’s explain the traditional concept of a call option:

What is a call option in traditional finance?

A call option in traditional finance is when an investor buys the right but not the obligation to purchase an underlying asset at a certain price on a specific date. (This is in contrast to the put option which gives the investor the right but not the obligation to sell an underlying stock for a given price on a specific date.)

The agreed-upon price is called the strike price. The agreed-upon date is called the expiration date. The underlying asset can be anything — stocks, bonds, commodities, etc.

For example, let’s say Investor A believes that stock XYZ is going to go up from $0.50 a share to $0.75 in the next month. Investor B believes it will either go down or not change. Investor A buys a call option for 100 shares of stock XYZ from Investor B for a strike price of $0.70 with an expiration date of one month. Investor A pays Investor B a premium for this agreement.

This gives Investor A the right but not the obligation to buy 100 shares of stock XYZ for $0.70 after one month. If stock XYZ rises above $0.75 plus the premium, then Investor A wins. In stock XYZ doesn’t rise above $0.70 plus the contract fee, Investor B wins and pockets the premium.

Investor A is long on stock XYZ and Investor B is short.

Furthermore, American options let you exercise the option any time before the expiration date. Whereas European options only let you exercise the option on the expiration date and not before.

There is no possibility of an option with no expiration data in traditional finance, the reason is that the premium cannot be calculated without a set expiration date.

Options that have a fixed expiration date and a fixed exercise date are called European options.

Buying call options on Binance

Call options are also possible in crypto. Let’s take a look at how Binance has implemented options.

On Binance, We can see several currency pairs such as BTCUSDT, ETHUSDT, etc.

Binance options are set up as European options, meaning that they can only be executed on the expiration date and not before.

As shown in the screenshot below, Binance’s order book shows each strike price with an expiration date.

On Binance, you pay a premium to buy the call option. Then, if the crypto price is above the strike price on the expiration date, you will receive the difference.

This is the same as traditional finance.

Let’s take a look back. Predy V2 offered Perpetual Futures. To implement this, it was necessary to find a solution so that the futures price didn’t deviate too widely from the underlying crypto price. That was solved by introducing the concept of funding fees.

With funding fees, shorts will pay longs fees or vice versa depending on whether the underlying crypto price is higher or lower than the futures price. This forces those either short or long to close their positions and start receiving fees instead of paying them, thereby bringing equilibrium to the rates once again.

Predy has extended this concept to options trading in Predy V3.

Predy v3 Perpetual Options

Let’s see what actually happens when we get a Call option in Predy v3.

Here is what you need to do to buy a call option.

1. Deposit USDC in P-Vault (Predy Vault). In the example above, the P-Vault has $3,971.23 inside it.
2. Select Option (WETH/USDC Long Call)
3. Select Strike ($1,300.55)

The system then shows you the margin it is utilizing for your trade, and also the “interest est” (defined below).

• Margin Utilizing is what is locked by the protocol as collateral in the vault (in USDC).
• 24h Interest est is the interest rate you will pay to maintain your call option, deducted sequentially from the Vault’s USDC.

As collateral, USDC48.2 is locked, but the daily interest rate is only USDC1.49. You are able to close this position at any time if you wish to stop paying interest.

Isn’t it great? This is the Predy’s V3 Perpetual Option!

Predy V3 facilitated by LPT from Uniswap

Predy V3 is made possible through Uniswap’s Liquidity Provider token (LPT). We implement it by lending and exchanging USDC, LPT, and ETH depending on the user’s position. But we’ll go into this in more detail in our next article.

Before ending off, we would like to send kudos to Guillaume Lambert for his incredible blog which has been extremely informative and helpful to us in developing our product.

Predy V3 Testnet now open!

Here are some links to help you start trading Predy V3 perpetuals now on our Testnet!

1. Get ETH on the Goerli testnet: https://goerlifaucet.com/
2. Send ETH from the Goerli testnet to Arbitrum Goerli: https://bridge.arbitrum.io/
3. Get USDC from Arbitrum Goerli: https://v3app.predy.finance/faucet
4. Go to Right above to Deposit USDC into Vault (shown in picture below): https://v3app.predy.finance/options

Then, you are ready to start trading on Predy V3!

If you want to read the Predy V3 documentation, you can find it here: https://predy.gitbook.io/predy3/