Join The Blue Season on Galxe

Range Orders on Premia

đź’Ž Smart Range Orders

Range orders are a way for sophisticated traders to maximize capital efficiency and trading fees earned.

  • Provide liquidity within a range
  • Fully customize your LP risk exposure
  • Maximize fees and premiums earned
  • Create permissionless pools for any option
  • Long or short collateral seamlessly.

Concentrated Liquidity Pools

Concentrated liquidity is a feature that allows liquidity providers (LPs) to set a specific range of premiums they want to provide liquidity for rather than providing liquidity for the entire spectrum of premiums.

For each option on Premia Blue, there's a liquidity pool. This also means that if there's no liquidity for a specific option, users can freely set a range order for that option and seed liquidity that way.

Range orders are one-directional. This means that a range order can only provide either bid- or ask-side liquidity to an option at a given moment. However, Premia's range orders are designed to automatically flip as the price of an option travels through the range, switching exposure to maximize utilization and fee generation.

These "Smart Range Orders" are designed to maximize capital efficiency while retaining maximum flexibility and customization for LPs on Premia - something that is often missing from on-chain options protocols!

Smart Range Orders allow LPs to fully customize the options that their capital will be used to underwrite, granting them full control over their risk exposure, a first in DeFi options!

Setting Range Orders

Users can create liquidity pools for options, specifying the price range and parameters within which they want to provide liquidity. This customization means that liquidity is not spread thin over a wide range of prices but is instead focused where it is most likely to be utilized.

  1. Asset pair (e.g. WBTC/USDC)
  2. Directional exposure (Bid/Ask)
  3. Strike price (the price at which the option can be exercised)
  4. Expiration date (the date after which the option can be exercised)
  5. Price range (range of option premiums that liquidity will be used inside)

When a user creates a range order on Premia, they define the price range within which their liquidity will be active. If the price of the underlying asset stays within this range, the liquidity is used to facilitate trades, earning the provider fees.

Should the price move outside this range, the liquidity becomes inactive but remains in the pool, ready to be activated again if the price re-enters the specified range.

Long-Collateral: These orders only hold long options or the collateral asset. The collateral inside will be used to buy options as they become cheaper and those options will be sold back into collateral as they become more expensive. Conversions will automatically generate maker rebates in the process.

Collateral-Short: These orders only hold short options or the collateral asset. The collateral inside will be used to sell options as they become more expensive and those shorts will be converted back into collateral as they become more in demand. Conversions will automatically generate maker rebates in the process.

Why To Use Range Orders

Range orders are particularly beneficial for those that wish to market-make in a more efficient and granular manner.

For example, if a liquidity provider believes that the price of an asset will hover around a certain level, they can set a range order around this price to capitalize on their prediction. This targeted approach can lead to more efficient use of capital and potentially higher returns compared to providing liquidity across an automated price range as the vaults are designed to do.

Increased fee earnings due to concentrated liquidity: By focusing liquidity in areas of high trading activity, providers can earn more fees per unit of capital.

Greater control and customization: Range orders allow providers to tailor their strategies based on their market insights and risk preferences.

đź’ˇ Range Order Bot

Range orders generally require a great deal of management and maintenance in order to maximize utilization and efficiency, which is why we've developed an open-source Range Order Bot that abstracts away the complexities of programming. Check it out here!

Test Yourself!

What are range orders useful for?

  • Nothing, they are complicated and high-maintenance for no good reason.

  • Buying options for cheap.

  • Maximizing capital efficiency and fees earned by actively managing a concentrated liquidity position.