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Update TIP-51.md
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danijelthales authored Sep 22, 2022
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Expand Up @@ -35,7 +35,7 @@ The discount is applied to the pricing of the option. As price of the short opti

Let's go back to the state where AMM has 10,000 DOWN options starting at 10% discount. What if someone wants to buy more than 10,000 options?

###1. Someone wants to buy 15k options.
### 1. Someone wants to buy 15k options.
We established he will get a 5% discount for 10,000 options, so he pays for those 19 cents a piece.
The remaining 5,000 options is subject to a positive skew impact, starting at 0% and ending at 10%, so an average of 5%.
The positive skew impact is applied to the profits, so we have to calculate how much 5% premium is from 80 cents profit and then calculate how much skew impact is that on the price itself.
Expand All @@ -45,7 +45,7 @@ The positive skew impact is applied to the profits, so we have to calculate how
The resulting skew impact for his quote is:
`(10,000 * (-5%)+5000 * 20%) / 15000 = 0.033` so his avg skew on that quote is 3.3%

###2.Someone wants to buy 12k options.
### 2.Someone wants to buy 12k options.
We established he will get a 5% discount for 10,000 options, so he pays for those 19 cents a piece.
The remaining 2,000 options is subject to a positive skew impact, starting at 0% and ending at 4%, so an average of 2%.
The positive skew impact is applied to the profits, so we have to calculate how much 2% premium is from 80 cents profit and then calculate how much skew impact is that on the price itself.
Expand All @@ -55,7 +55,7 @@ The positive skew impact is applied to the profits, so we have to calculate how
The resulting skew impact for his quote is:
`(10,000 * (-5%)+2000 * 8%) / 12000 = -0.02833` So he gets a 2.833% discount for the full quote of 12k

###3.Someone wants to buy 17k options.
### 3.Someone wants to buy 17k options.
We established he will get a 5% discount for 10,000 options, so he pays for those 19 cents a piece.
The remaining 17,0000 options is subject to a positive skew impact, starting at 0% and ending at 14%, so an average of 7%.
The positive skew impact is applied to the profits, so we have to calculate how much 7% premium is from 80 cents profit and then calculate how much skew impact is that on the price itself.
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