Earn risk-free returns using Moret
We are going to run a series of articles introducing trading strategies that run on Moret. Some of the strategies are riskier than others and they suit different traders according to their book and risk appetite. Today we start with the most straight-forward strategy: arbitrage.
The strategy is basically to capture the price differences of the same option contract between Moret and another platform, e.g. Deribit. For example, the implied volatility on Deribit on average exhibits negative volatility spreads compared to realised historical volatility. The imbalance between the buyers and sellers means that the implied volatility can be significantly lower if there are more option selling orders than buying orders. The lure of high volatility level compared to classic assets such as stocks to market makers is obvious, which could explain the imbalance.
Moret, on the other hand, runs an AMM model for implied volatility. This means that the Moret volatility oracle, which calculates the volatility purely from historical price movements, provides the benchmark of volatility level, whilst the supply and demand of options only affect the premiums above or below the benchmark. Therefore, the implied volatility on Moret would follow quite closely with the historical volatility.
As a result, trades could buy the under-priced Ethereum options and sell the same options on Moret, earning the difference in price, entirely for free! The only cost is the opportunity cost from putting down collaterals for the selling positions on Moret.
Contact us on https://t.me/moret_options if you’d like to know about the trading opportunities.