Abundant Liquidity for All Options

Solving the Capital Limitation Problem

  • In orderbook-based exchanges, placing a quote to buy or sell an option requires traders and LPs to commit capital, constraining the volume and frequency of opening positions

  • Moby's Options Liquidity Pools (OLPs) are distinguished by their ability to supply liquidity for all options positions on a 24/7 basis without capital limitation

No Capital Limitation on Moby’s Liquidity Provision

  • Moby boosts capital efficiency by mandating capital only at the time of trade execution, eliminating the need for capital with each quote

  • Traders on Orderbook-based exchanges, like the liquidity provider, need capital whenever they place a quote in the orderbook

  • This limits the liquidity due to the capital efficiency of the liquidity provider

  • Conversely, OLP does not tie up capital every time you quote; it only happens when you execute a trade at the options price (premium)

  • Because of this, OLPs can utilize all of their capital for every option specification

  • Example: On an orderbook-based exchange, a Liquidity Provider with $100 can order $1 for each order book with 100 options. In Moby, an OLP with $100 would quote all 100 options at $100 each

Solving Liquidity Problem, Even for ITM (In-the-Money) Options

  • Closing In ITM Options on orderbook-based exchanges poses challenges due to their high intrinsic value-driven price, leading to low profitability and consequently minimal incentive for LPs to offer liquidity

  • The lack of incentive for LPs to back ITM Options leads to a liquidity shortage and difficulties for traders to close or sell their ITM Options positions

  • This scarcity makes it hard for traders to realize profit on successful predictions, as limited buyers or sellers are available to facilitate the trade

No Liquidity Constraint on Moby

  • Moby's OLPs do not require capital upfront to supply liquidity, which significantly facilitates the provision of required liquidity to close ITM Options

  • Moby’s round-the-clock liquidity provision ensures a seamless trading experience, enabling efficient strategy execution and position management for traders, especially in situations where traditional platforms might face liquidity constraints

Last updated