Revolutionizing Options Tradings on zkSync | Charlotte, Zomma | ETHTaipei 2023

options trading on chain acquiring the elements of diversity and long linearity of traditional finance options product to suit a fast evolving D5 so zoma protocol is feature complete competitive to converge and to welcome all trifi and D5 Traders and users so these are some of the topics I'll be covering today sharing on why divide options and why options and what are some of our infrastructure and how do we get the price mechanism for zoma as well as our some of the innovations that we build such as liquidity pools as makers and post products and also we offer liquidity addition and removal at any time how do we manage to get that and our core team okay these are the reason why that we want to do default options so I know people are really familiar with perpetuals and filters so as you can see the trading of options on the trend is getting more and more significant and even like up to this year February 20th the trading of options volume is catching up to the Futures Trading so that's why we think options is a really useful tool in terms of hedging and in terms of safeguarding your assets as an insurance and these are some of the problems that we find out and we realized during the centralized exchange is that um uh we took this screenshot from Jerry a bit like the most um volume trading Derby training central X exchange so options products there are two which are the cotton posts and we try to offer um as much spread as possible right so there will be different strike prices as you can see from here they have about 13 strike prices with 11 expiration dates to cover a wide range of the trading choices so this will add up to about 300 skills so each of them is an individual Market by themselves so what does that mean is that we think at a product which is at the early development stage where the quality can be quite insignificant in a sense that with you using the audible matching style can be a little bit inefficient so that's why what we are building right now is we aim to be the Divine Venture that focuses on Paving the financial infrastructure just you know along with what vitalik just mentioned they want to build something that's like um uni swap where we allow others that build on top of us and it's open is you know it's open source everyone can join in the ecosystem of zoma so I'll touch on the some of the infrastructure of how zoma is built and how do we get our price so right now our D5 pricing comes from Oracle but then we will cut we will undergo this price with our calibration model which that we will sort all these um fragmented and inconsistent auction price going through has the model with generating a continuous price price curve so in that sense with this price curve we are able to fulfill you know the 300 skills that you saw just now we are able to fulfill and quote against to all these trades so fulfilling all the um trades that the Traders put in and when the IV deviated too much will also include another model which is we model to kind of correct the IV and then quote the best option price for all our users on the platform so let me mentioned right now um there are still lacking in the D5 option space where we try to offer as close to the traditional options products as possible so we offer our traders that can buy and sell costs and posts freely at any time and we offer our LP the freedom to add and remove liquidity Without You Know Much hesitation or restrictions so you can keep this in mind so these are some of the models that we use which is the Hester models that generates the comprehensive price curve but we add in the parameter to adjust on the price quotation which is the pull adjustment and also the different percentage of the utilization of the font I will talk about this in my next few slides and as you can see and imagine how options requires and takes a lot of the calculations in order to be as precise and in order to be as ideal so our team overcome many challenges in terms of calculating price and in terms of calculating black shells and Hastings so that's why we come up with another idea of the Unchained price map whereby we will include different parameters and IVs and we update them as instant as possible to provide and provide quotations to all our takers so we will update the IV parameters such as Sigma gamma and then we'll calculate the price and then when we upload on chain there's a price map for our system to look up to and to map between the you know different price and different IV and also uh remember I mentioned we adding the idea of per adjustment as our parameter so there's a utilization rate they will also add in when we try to moderate and we try to kind of adjust for our price so price is adjusted from zero percent to ten percent when the utilization rate which is the liquidity pulls rate at 4 within 0 to 95 percent and prices adjusted from 95 to 100 which about only five percent for utilization rate with within 10 to 100 percent so this is what has the model looks that is a little complicated but it's actually not so has the model is a really stochastic volatility model widely used in quantitative Finance to model the Dynamics of financial markets so I believe everyone is really familiar with health Dynamics volatility and cryptocurrency is right so Hassan is introduced by this guy because Steven Hassan in 1993 as an improvement over black shows model I'm pretty sure you guys are familiar with vs model blockchains model which assumes the constant volatility of the underlying asset so which really aligns with crypto in comparison to the traditional Finance products so um this has the model also assumes that the underlying assets follows a geometric Browning motion which is this part the the Brownian motion so what does it mean is that um it will undergo another square root process to to generate the right um volatility to tell us the right information of volatility so the parameter setup has some models there are five dimensional Subspace of this view cutting space so these are the you know like the geek knows these are the five dimensional Subspace so we basically used it has the model that described the dynamic of our underlying assets so we offer either options right now so you can imagine how Dynamic it is for the the market right so this is the idea of has the model so what's more important is how do we get the option price so of these underlying asset follows it has the model is that you can tell has the model actually provide a semi-close formula in a sense so what do we do first is that with the analogy with brushes formula we try to guess the solution so this can tell in our first equation where this P1 and P2 are basically no more densities in our black short formula so um P1 and P2 we can obtain this figure directly but we try to use currency function of them and then we use the inversion formula of the characteristic function to obtain the distribution of P1 and P2 so now we can actually just insert P1 and P2 back into our equation one to get the option price right so all these process seems really tedious so imagine while doing all these calculations on chain these are so much challenge for us but our team overcome these challenges as much as possible and to stay as decentralized as possible that we overcome the problem and try to quote as close as to the reality right um with proper chose choice of the parameters I mentioned just now there are five dimensional Subspace for Hester models that this model appears to be very flexible and promising in the description of the option prices right now and I will talk about the paramuses right now and because of time constraint I will not talk about the initial variance and the long run variance I will touch on these two different parameters which we also take into consideration so the lab actually shows the effect in changing the sigma so Sigma is the change in the volatility so what is really important options is that you get the volatility right and so if we can observe the change in the volatility which the Volvo right is it is actually provide us with a volatility curved smile that is as close to reality and on the other hand on the right hand side it shows the effect of changing the need the speed of main reversion which is understood at Kappa in general so we can see that um as the change in the first Sigma when we increase the sigma you can see the curve the volatility smell become more curvy on the other hand when we look at Kappa when we increase Kappa in a sense from the blue to the green 10 to 20. it becomes uh flatter in general so the the lower the copper the more curvy it is so in this term we see compensate effects of these two parameters to each other so from these examples we can tell this relation between parameters in terms of the smell and also relations between parameters so what we're trying to do right here is that we're trying to find that powerful coefficient that allows us to generate into map between the perimeter space and the volatility space So within model collaboration is really really important for particles that go with the amms kind of style or protocols they use liquidity pools as their counterparties encounter makers and sense so during these collaboration process what we're trying to do is that the model tried to get as close as possible to The observed reality so most of the collaboration problem can be formulated as an optimized problem so in this case we think this is one of our best Innovation because right now I think zoman is the only one that use collaborate rated model in quoting option prices in comparison so some of the other players in the space so with our collaborative model we are able to get a more precise implied volatility and then we will be able to use black shorts model to quote a really competitive price for all our Traders and LPS on our platform and to be able to fulfill all the different skills you know at the same time while sticking pool the quality pool we also offer another Innovation idea which is poor as the products where all these pulled each of it as the fund but myself where you can have your own Equity you can also have your own shares in a sense I will touch on this just in a little bit and also with different um liquidity pools it will be able to reduce training slippage and also we have more in passive income for the LPS right so in comparison to other device options protocol or different protocols in general so that we offer multiple poor choices whereby some of our competitors or players and divide options only offer one single unity pool this really limits the choices of LP and also it actually increases the risk that this platform has to bear so for zoma we offer liquidity pools when it in turns we can offer different leverages and APR for or users on the platform to choose upon it also segregate risk so it brings stability and it brings freedom in to all our users and these are some of the benefits of multiple pools and what's more important is capital efficiency we talked to many Traders Billy retail institutional Capital efficiency is the most important consideration to everyone so by looking at other players in our ecosystem we try to be the plan platform that provide cross-margin trading and also the highest Capital efficiency at the same time so I think this is the greatest breakthrough for D5 option space and it is also another breakthrough for zoma what is multiple LP pools so important how do we offer different leverages and APR through our mechanism so these are some of the ideas that you can take a look is that we offer four different types of liquidity pools ideally from conservative to aggressive so you can understand that um the leverages is based on the correlation of the base diverges and the specific leverages that each pool is offering so for instance if zoma poor for example conservative offers the end times of the leverages right so we use the calculation of the base Divergence now at this 10 time the equation goes like this and over 10 minus 1 over n over 10. so this is how we calculate the leverages so available liquidity that can be used for quotation is also calculated that way so take these conservation pool for instance that um there is a hundred percent of the liquidity in this pool right so how do we manage and use this percentage of the liquidity quotation is uh most of the liquidity in this pool is reserved about 30 and then 70 percent of the liquidity the funds are being used to quote against the Traders so as you can see previously we have four different ports stable balance and aggressive so the result of the quality goes from 30 to zero percent so as aggressive it is right the liquid Reserve will be lesser so in that sense uh we are able to offer different Race Choice re-spiring level to oral LPS and then LP can also decides on what kind of record it was you are more comfortable at adding in so with the aggressive pull please take note that we will require an initial margin of ten percent so to allow partial collateral with leverages of maximizing utilization of capital so in zoma there's no fully collateral for any of our users we require partial collateral at about 10 of the initial margin so like I mentioned another Innovation is that liquidity addition and remote removal is freely can be fully done at all time there's no registration no freezing period so as soon as whenever you want to add in red whenever you want to remove it's all at your ease and comfort so these are some of the data that you will see um where you log on to zoma's training page so this is uh the liquidity pool page that you will be seeing on the right hand side it's more like your account so basically you can tell like how much liquidity you have added in and how much PN on realized pnl that you will get when during expiry and also shares and cost per share so this shares thanks to GMS you can understand the share as like a glp or we call it zoma LP right so these are the shared the zlp that you will get and the cost per DLP that can understand it that way and on the left hand side is the poor information so when you log into the quality pool these are some the data that you will be able to observe for example the equity so what is the equity now for this pool and utilization rate remember I talked about how our price is adjusted also based on utilization rate so that figure is pretty important and emerging balance available balance and the price per share in this pool right now and the total shares so we also include Health Factor if you are familiar with the traditional Finance you will understand that this it can be a very important risk factors in the transitional Finance where it provides you the idea of how safe this poor is and how safe your positions is and how safe your trade is so I won't touch on much of the formula right here but these are some of the formulas that we use when we calculate our liquidity and also our Equity so please know no trades will be involved when the available liquidity of one specific pool is less than zero means no money right so we can trade so when the pool has no money we won't be able to trade I think that's simple as that so liquidity removal I think that's a another crucial part is that we allow funds to be added in and remove freely at any time so the same like on the right hand side is what you will see when you try to remove your funds and transfer back to your meta meds or any other wallets that you use to connect so like I said so the zlp the shares you got for example is about 980 if I remember correctly is that I added a thousand into this Dakota pool so I tried to just click as freely as possible like 850 percent of the amount that I want to withdraw so I mentioned uh there's different price of the share the zlp price change so right now at this moment when I want to withdraw the quality the price is at 1.01 so I'm gonna withdraw about 500 at a fee about 0.5 so the amount received after I do all this transaction on chain approval I will get about 497 of the usdc so remember everyone Bears position this is the poor position right now everyone Bears position so when I want to go when I want to withdraw my fun how about the position that they come after me so there are a few ideas that we do when we want to offset our positions uh bearing in mind that we try to forego the maximum amount of the inefficient margin as possible when we are trying to offset this opposition to improve the liquidity of each pool and lower the overall risk of the poor so when we try to do phone withdrawal when we try to offset the positions there are three orders that we do number one is we try to offset those cell position first then the buying positions and those out of the money then to the in the money positions so when they're out of the money we go from the further strike prices and to the closest Red prices and after we will look at the expiration date those are further at the expiration we will clear them first and then slowly too far from the expiration so liquidity removal work under normal circumstances and fun will be withdrawal really successfully when the liquidity of each poor sufficient and in order to lower the frequency yeah definitely there will be some fees involved so this is um the difference the comparison for the pool before I withdraw my fund so this is how my account look like and how the poor information you can see the slight differences in the change of the poor information so remember I withdraw about half of my liquidity in this pool about 500 usdc and you can see my shares kind of reduced by half and my unrealized piano because I kind of do it right away so it's kind of like a little ugly in a sense and as you can see right the cost of share increased the price of the share increased after because when we remove funds it will actually reduce the equity in within that pool so when other LD also goes no vice versa where when LP add liquidity into the pool it also dilutes the share within that on the code of the pool itself so that is why we talk about recordable as a fund structure with this idea of unstructured idea of equity ideas of zlp we are able to provide our LP a more flexible training strategy and flexible training experiences so in some in general for the Trader right now we offer cross margin um trading so it's really simple if the training experience is just like Central likes options training it's cross margin and then we offer the pretty much the lowest initial margin on on most platform right now and for the lp you enjoy the flexibility to add and remove liquidity at any time and this fun idea and structure with different multiple leverages for you to choose upon and also a hedging purposes to safeguard your assets like an insurance and these are some of our core team members we are crypto ogs in Taipei Tom and taka has been in crypto spacing 2013 and 2017 we found it another deck so our team is pretty experiences uh pretty experienced and with some of the innovations that we build we believe that we are able to revolutionize options trading especially on D5 and also on ZK sync we just launched on Z casing on the same day as ethereum hackers on day one so if you are interested to know more about our product or platform please go on try at zolma dot app sorry app.

pro okay I'll show you guys the link later on but honestly speaking we want to learn more ones you can sing at if type as well because we actually see some blockers when we develop um ZK but we believe it will overcome so late so I'll share with you some of the blockers that we have right now number one is the Oracle price feed like I said price can be really important right but right now there's a lacking in efficient price Oracle on ZK but they are really helping us really aggressively to overcome these challenges and we try to talk to different teams like piece and Redstone to to to to look for the best solution that is one problem another problem I think all of you will know will be the high gas involved which every time when we when I myself try to trade on ZK on our main net we will experience a really high guess right the management will always estimate on like the amount of gas that require when you approve a transaction so it actually called it 10 times more than it what what it actually is so but you know whenever we kind of click in the approve the transaction is 10 times less so we also try to know why and if the estimation can be closer to reality because without these high gas could really hesitate Traders and Builders imagine with them in Oracle for products like options for how non-linearity it is uh it can be really costly right now for all Builders but we know and we understand it is still developing so we try to grow at the same time so I would like to invite all of you here today to try and trade on zoma and Prova has the feedback as possible so if you try to train on zoma you will also experiencing Z casing at the same time so maybe you will enjoy some of the early incentive on zoma and also on ZK yeah so this is how it is is is is launched on the minute so please follow our Twitter zoma Pro after this event and also start trading options because it is a really important hashing tool that every one of us should know because your key should always be your key thank you so much you can talk to our member with the zoma protocol t-shirt you have other questions or other inquiries that you want to know more about zoma oh thank you thank you Charlotte uh