Siren Flow Technical Series Part 3
Introduction
Welcome to part 3 of our technical blog series, where we explore the inner workings of a decentralized options protocol. Previous installments covered the concepts of MEV within options protocols and Deriving a no-arbitrage price for a call option. This installment builds on the two previous articles in the series, and readers will gain the most from following them in order.
Part 3 dives deep into the process of coming up with a practical delta hedge, a massively important component of options market making. Siren Flow’s unified liquidity pool makes use of automated delta hedging in order to insulate liquidity from price exposure, creating a yield source that is based solely upon bid/ask spread and premiums. Because of this practice, trader and LP profitability are not mutually exclusive on Siren Flow, making participation more attractive for both.
Note: this piece is heavy with mathematical formulas, which Medium does not support well. For this reason, it’s uploaded as a pdf.
