Options Liquidity Mining Live on Premia Blue

Start Earning OLM Rewards on Premia Blue!

Author

Weka
October 25, 2023

Depositing in select vaults on Premia Blue makes liquidity providers eligible for a pro-rata share of liquidity mining rewards directed to the vault.

These rewards are now in the form of physically settled PREMIA call options, creating a novel win-win system that aligns the interests of both vxPREMIA holders and liquidity providers!

Deposit liquidity, earn premiums and PREMIA call options, claim!

Keep reading for a detailed step-by-step overview of how OLM works along with the settlement cost required for claiming.

Options Liquidity Mining (OLM)

Premia Blue replaces the traditional token-based liquidity mining model with Options Liquidity Mining.

In OLM, liquidity providers are rewarded with PREMIA Call Options at a 45% discount to the underlying asset’s market price at the time of claiming. These options are physically settled using USDC.e, with a cost associated for exercising.

Here is an overview of Premia Blue’s OLM:

  1. Liquidity providers receive PREMIA Call Options that can be claimed at any time.

  1. The strike price for these options is set to 55% of the current market price at the time of claiming. E.g. if PREMIA is trading at $1, the strike price will be set to $0,55.

  1. The PREMIA Call Options will expire 30 days after claiming. Users are required to deposit sufficient collateral (USDC.e) for settling the options during this time.

  2. The required settlement cost equals option size x strike price. E.g. if there are 100 PREMIA Call Options with a strike price of $0.55, the settlement cost will be $55.

  1. After expiration, users need to manually settle this position.

  1. Upon settlement, 90% of proceeds circulate to users holding vxPREMIA, while the remaining 10% is directed to the Blue Descent DAO.

  1. Protocol fees are collected on exercise, and taker fees are levied if the option is traded on the secondary market.

It’s important to note that any USDC.e deposited for settlement is not locked – instead, a protocol fee is deducted from the total deposited amount. If a user opts to withdraw their deposited collateral (effectively canceling settlement), they will receive their deposit - fees.

In the event that the liquidity provider only deposits a portion of the settlement cost, the appropriate amount of PREMIA Call Options will be exercised at maturity, while the remaining portion will be subject to the terms defined below.

Here is what happens if the liquidity provider opts not to deposit any collateral for the settlement cost within 30 days of claiming the options:

  1. If the options are not exercised, they will instead be locked for a one-year period.

  1. After conclusion of the one-year period, 25% of the options’ intrinsic value will be directly credited to the liquidity provider’s wallet. E.g. if the options could’ve been exercised for a net profit of $100 at expiration, the liquidity provider would earn $25.

OLM is designed to align the interests of liquidity providers, staking users, and the broader Premia Blue ecosystem. This mechanism is entirely modular, allowing any market to be deployed as a physically settled option.

This harmonic balance between LPs and vxPREMIA staking users is a novel mechanism where both parties will benefit from token emissions.

Join a Better DeFi Options Future 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!

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