Concentrated Liquidity Pools on Premia Blue

Use capital efficiently, define your exposure, and maximize fees earned on Premia Blue!

Premia Blue is the first on-chain settlement engine and orderbook for DeFi options on Arbitrum.

Ever dreamt of trading or market-making options for a memecoin? Anyone can create a pool on Premia Blue for any option on any token.

Whether you're setting the strike price, maturity, or price range, Premia Blue hands you the reins. Define risk, maximize capital efficiency, and optimize trading fees.

LPs can fully customize the underlying token, strike price, and expiration date of the option they wish to market-make. If a pool doesn’t exist for the option, the LP can seed the liquidity to create one!

In summary, LPs on Premia Blue have full freedom over their exposure.

Let’s dive into Premia Blue’s concentrated liquidity pools and smart range orders!

Concentrated Liquidity & LP Customization

In a concentrated liquidity system, capital is assigned to a price range to maximize utilization and generated fees.

Concentrated liquidity comes in addition to the fully custom LP system of Premia Blue, where LPs can fully define the type of option they wish to market-make:

  • Underlying token (ETH, BTC, any ERC-20 with a valid price oracle)

  • Option type (call or put)

  • Strike price (fixed to round numbers)

  • Expiration date (up to 1 year)

  • Initial exposure (long or short)

Here’s what concentrated liquidity unlocks for LPs on Premia Blue:

  • Use capital efficiently: LPs can manually set the range at which their liquidity will earn the most fees.

  • Define your own risk: LPs get to set the exact options parameters they want to underwrite for, letting them define the range of risk they want to take on.

  • Maximize liquidity utilization & trading fees: As LPs are incentivized to provide liquidity to the optimal range, capital is used to its maximum efficiency. LPs get the best fees, while traders get the most liquid markets possible.

And it gets even more interesting!

Let’s get in-depth with Premia Blue’s Smart Range Orders and how they optimize fees generated for LPs by automatically “flipping” the exposure of the price range!

Smart Liquidity Management and Range Orders

As explained above, LPs on Premia Blue can set “range orders” that define the upper and lower bounds of the premiums their capital market-makes.

Range orders on Premia Blue are one-sided; this means that by choosing “long”, liquidity is utilized to underwrite long positions on that option. And by choosing “short”, short positions are underwritten instead.

Although Premia Blue’s range orders provide one-sided exposure, they “flip” automatically. What does this mean?

As the market price moves through an LP’s price range, the LP will collect trading fees and the LP’s exposure will be updated. If the market price moves back down, the LP will collect more trading fees as the LP’s exposure reverses back to its original state.

  • Range orders flip exposure automatically

  • Fees are collected both ways

  • Increased capital efficiency and fees

  • Lower risk for LPs

In practice, this means that LPs are able to gain both long and short exposure to a given option, unlocking flexibility similar to that of a centralized exchange.

Here’s how it works from the POV of an LP:

  1. Choose the underlying token

  2. Choose the option type (call or put) and side of the range order (long or short)

  3. Enter the strike price, maturity, and size to deposit

  4. Define the upper and lower bound of the range order

  5. Add liquidity and accept the transaction in your wallet.

It’s as simple as that! For a more in-depth and technical explanation of the LP range orders, read the docs.

Are you excited, Anon?

Premia Blue’s interface is already live — go take it for a test-drive in anticipation of the launch!

Join the Future of DeFi Options With Premia Blue!

Premia Blue is the first non-custodial options settlement layer with fully customizable options parameters and risk exposure.

Maximize capital efficiency, define your own risk, and optimize fees earned with Premia Blue on Arbitrum (soontm )!

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