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January 6, 2022 23:49
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squeeth_option_hedge.py
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### | |
# Hedging options with squeeth (eth^2) and perps | |
# https://medium.com/opyn/how-to-hedge-options-with-squeeth-b5e30d5d83ac | |
# https://docs.google.com/spreadsheets/d/1PBwyqmZXGRZoAlgSa9_ZZiUM28J92-vm7mUybH9HsBc/edit#gid=0 | |
# | |
# Steps: | |
# 1. Sell oSQTH with the same gamma as the option that was bought | |
# 2. Buy ETH futures to hedge the delta from the option that was bought and oSQTH that you sold | |
### | |
### imports | |
import mibian | |
### eth/usd call option | |
strike = 4000 # strike price of the option | |
expiry = 30 # time in days till expiry | |
iv = .9 # annualized implied vol of the option | |
price = 4000 # price of eth | |
r = 0 # risk free rate | |
call = mibian.BS([price, strike, r, expiry], iv*100) | |
### squeeth calculations | |
squeeth_delta = 2*price | |
squeeth_gamma = 2 | |
squeeth_short_amount = (1/squeeth_gamma) * call.gamma # match the gamma on the option | |
future_long_amount = squeeth_short_amount * squeeth_delta # hedge the squeeth delta | |
print("Your call option should be hedged with {0} short oSQTH and {1} long ETH futures".format(squeeth_short_amount, squeeth_gamma)) |
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Does this take into account the current Squeeth normalization factor?