What Changes for Traders in Premia Blue?

Trade Options with Premia Blue's AMM and Orderbook Hybrid!

Author

Weka
September 19, 2023

By unleashing a unique hybrid of a CLAMM and an orderbook, multiple price quote sources, an advanced trading UI, and European options, Premia Blue is set to transform DeFi options.

It’s time to go in-depth with the changes and features we’ve implemented in Premia v3 that are most relevant to active traders on our platform.

Without further ado, let’s dive in — here’s everything that you, an avid options trader, absolutely need to know about Premia Blue: hybrid AMM & orderbook design, trading UI, customization and more!

Options Customization

Anyone can create a pool on Premia Blue for any option on any token.

This comes with the byproduct of vast customizability for traders; 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, traders can seed the liquidity to create one!

  • 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)

Automated Market Maker and Orderbook Hybrid

We’ve built Premia Blue with a unique hybrid design, combining the advantages of an Automated Market Maker (AMM) and an orderbook.

This approach addresses the limitations of traditional AMMs by incorporating the dynamic flexibility and precise pricing of orderbooks. By doing so, we’ve optimized liquidity management and enhanced the overall trading experience for Premia’s users.

Additionally, combining the pool-to-peer architecture of Premia v2 with a highly efficient orderbook allows Premia Blue to cater to a wide variety of users. Whales and normal users alike get to enjoy maximum efficiency and optimal pricing with multiple quote sources for the orderbook.

Price Quotes

Premia Blue ensures deep liquidity and accurate pricing by providing multiple price quotes from various sources.

This diversification of price feeds not only helps to mitigate the risk of price manipulation, but also offers traders a broader perspective on the market.

Quotes from liquidity pools, strategy vaults, and the RFQ network are aggregated directly into the exchange layer trading UI.

  1. Liquidity Pools: In Premia Blue, liquidity pools offer traders a quote, based on the size of the trade and the current state of the market. Liquidity providers can place concentrated range orders on the buy (bid) or sell (ask) side, similar to concentrated liquidity AMMs for spot markets.

  2. Strategy Vaults: Vaults in Premia Blue can execute easily accessible strategies and split returns pro-rata across depositors. Vaults that are designed to trade options can then be aggregated within the orderbook. Vaults such as Knox Vaults, and the C-level Vaults (Premia V2 pools — but better), for example!

  3. RFQ Network: The RFQ network further enhances the pricing and trade execution of Blue. Traders can submit a request for a specific option contract, and in return, they may receive customized quotes from an off-chain messaging layer of market makers and liquidity providers.

  4. Limit Order Book: Along with the RFQ network, users can receive quotes from limit orders placed on the Arbitrum Nova orderbook. Anyone can place a signed order, which will be verified and validated before aggregation.

The aggregated price quotes create a non-custodial trading experience similar to that of a CLOB — or in other words, a centralized exchange.

Change From American to European Options

Premia Blue marks the transition from American to European options.

This shift comes with numerous net positives for Premia Blue and its users, streamlining the trading process whilst reducing risks and enhancing pricing!

  1. Lower Transaction Costs: European options are significantly cheaper to implement on-chain, due to only requiring a single settlement value to be accounted for in each option pool. This means traders and LPs can enjoy much lower gas prices per transaction.

  2. More Accurate Pricing: The fixed expiration date of European options eliminates the need for the excess complexity that is otherwise needed to account for early exercise scenarios. This allows market makers to price options more effectively for assets with constantly changing yield opportunities.

  3. Limited Exercise Advantage: In practice, only a small minority of users ever utilized the ability to exercise American options before their expiration date. With this switch we are simplifying the overall experience without sacrificing significant functionality.

Enough said, the pros most definitely outweigh the cons.

Although European-style options can’t be exercised before expiration, traders can still close their positions early by selling the option.

Advanced Trading UI

We’ve designed Premia Blue’s trading UI to fill the gaps of v2.

In short, we wanted to provide our users with a wide range of features and customization options based on their preference and experience level.

All without leaving out anything of essence such as miniscule details or the liquidity of certain expiration dates.

We’ve kept the essential options parameters of v2 while also introducing new features such as an integrated price chart and an orderbook view for traders used to a more traditional options trading interface. Additionally, users can now set both buy orders and sell orders inside the same page.

Premia Blue Option-Chain View

Premia Blue Basic Trading View

Premia Blue’s trading UI is a significant upgrade from the previous version, providing users with everything v2 was missing.

Premia Blue is Live on Arbitrum!

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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