Are you a bear or a bull? What Tactic should you use in Chainge Finanace 2023?
In 2022 Chainge had strike prices set quite high for the most used assets in options ($FSN and $CHNG), maybe even ridiculously high. Likely that happened because the time they were set was during a price spike that happened at the end of 2021.
Whatever the reason the assets remained below the strike prices for the entierty of 2022, and in hindsight there were only two correct tactics regarding options.
- Write/sell CO
- Buy/LP PO
Both bearish tactics, but with very different appeal. Tactic 1 is for bulls who already have the asset en masse, and wants a way to extract extra value from it, by taking on a little risk. But with a very high CO strike price like was the case in 2022 that risk really doesn’t exist, so it more becomes a way to score secure extra income provided by high yield chasers in CO pools.
While Tactic 2 was simply the right play under the market conditions for the year. But of course no one knew this beforehand, and had it been a more bullish year it’d have been a horrible tactic.
In 2023 Chainge has done something completely different for strike prices. Namely setting PO strike prices much higher than CO strike prices, and in both cases current prices are already ITM (in the money).
This means that the options (both PO and CO) hold actual real value right from the start and that excersizing them will make sense (from an arbitrage perspective).
This shifts risks into entierly new areas that we never experienced in all of 2022. Pooling options, will no longer mean that you are pooling a worthless asset in hope of scoring great yield and that it ends up valuable (ITM). Instead you’d pool an already valuable asset (ITM) in hopes that it doesn’t lose value, but also for great yield. This fact makes pooling options, much, much safer than it was. But at the same time it will make writing options something entierly different than just scoring some extra free money, and that may be a trap a lot of people will end up falling into.
Why? Because the amount of money you will get when writing/selling options will now be a lot of money. In fact, much more than before, but since the options are already ITM, it probably won’t be that long before someone uses the options to excersize them and get the original TF used to create the options. The end result might in many cases be that the writer just ended up selling off their entire asset for something slightly below market value. Probably not a horrible deal, but definatly not a great deal.
But writing/selling options can still be a successful strategy with some luck, but it’s going to be far from as safe as it was, while pooling options will be relatively safe. I won’t be reccomending writing options 2023, but I will describe some steps towards how it could be a success.
- Pick the direction you think the market will be going. If you think market will go up, you are interested in writing/selling PO. If you think the market will go down, you are interested in writing/selling CO.
- Look for price spikes. You want to make sure you are not selling options too cheap. So look for spikes in the price which would happen right when someone buys options (and demand could be higher than usual, so it might be a common occurance). Sell only into spikes, because arbitrage is going settle the price to normalcy quite soon. For options ITM the arbitrage opportunities are quite settled and stagnant and directly correlated with spot price. Succeeding this you could probably arbitrage profit right away, but we assume you are making a more mid-term bet here.
3. There are a number of possible outcomes.
3a. You were right about the market direction and someone excersized your option before you could buy it back. In this case you likely made some money, because the FSN, CHNG or USDT you ended up with + the USDT you got from selling the options, will be of a little bit higher value than the TF assets you locked in.
3b. You were wrong about the market direction and someone excersized your option before you could buy it back. In this case you likley lost some money, because the FSN, CHNG or USDT you ended up with + the USDT you got from selling the options, will be of a little bit lower value than the TF assets you locked in.
3c. If you were right about the market direction, and nobody excersized your options even after a month or two, then you might consider buying back the option cheaper to secure profit. In this case, again try to look for temporary market dips to get your buy back in. In this case whatever you sold the options for minus whatever you buy it back for, will be your profit. With the bought options you can redeem your original locked in TF-assets at no cost.
3d. You really got the direction right, and the options you wrote are no longer ITM. In this case you scored big, because nobody probably even wanted to excersize your options, and they no longer hold real value. To secure your victory you could buy back the options and secure the win, or hold off even longer to see if options value drops even further.
Since a lot of this is quite counter intuative to how many people think, I’ve tried to make a “cheat list” for what is a bullish and what is a bearish tactic in Chainge, and just how bullish or bearish each tactic is.
Leverage short — Ultra Bearish (Basically gambling, but if you think your really 100% know the short term market…[just remember that you still don’t, but have some fun if you feel like it])
Buy Put Options and Hodl— Bearish (Quite a risky tactic, compared to options LP. So only do this when you feel very certain of the market direction and that it will be drastic)
Sell Spot — Bearish (Good if you feel price will go down)
LP Put Options — Midlevel Bearish (Great tactic when Put options are ITM and markets are still falling)
Hodl/LP Time framed stablecoins — Midlevel Bearish (For long term bears, or people looking for highly secure income)
Hodl Stables — Slightly Bearish (If you’re actively looking for the right time to invest, dry powder is best)
Write and Sell Call Options — Slightly Bearish (Great tactic when call options are overvalued, especially if not even ITM. Good idea for whales who would be okay with a slow/natural lightening of their load.)
LP spot — Balanced (When you admit, you don’t really know what direction things are going, but you have an asset you believe in, and a stable you think is safe and maybe even some yield as a bonus. You can also be proud of being the backbone of DEX liquidity.)
LP Call Options — Slightly Bullish (Great tactic when Call options are ITM and markets are still rising)
Hodl Spot — Slightly Bullish (You think the market might go up more, but you are ready to sell if needed)
Write and Sell Put Options — Slightly Bullish (Great tactic when call options are overvalued, especially if not even ITM. Good idea for those who want to side-bet a market will perform without becoming a hodler right away)
Stake Spot, hodl/LP Time framed assets — Midlevel Bull (If you know you are going to keep your assets for a long time, make sure to earn as much safe yield on them as you can. Anything else, is giving up money)
Buy spot asset — Bullish (Buy the dip of the assets you believe have the greatest future. Don’t let anyone tell you otherwise)
Buy Call Options and Hodl—Bullish (Quite a risky tactic, compared to options LP. So only do this when you feel very certain of the market direction and that it will be drastic)
Leverage Long — Ultra Bull (Basically gambling, but if you think your really 100% know the short term market…[just remember that you still don’t, but have some fun if you feel like it])