Exploring some of the newer structured products in DeFi, like those on Ribbon or Dopex. Specifically, looking at covered calls or put-selling strategies. The advertised yields are attractive, but the tail risks are non-trivial. Anyone here running these for consistent alpha, and what's your risk management approach?
I've been using Dopex options vaults for a while. My approach to risk management is primarily position sizing and diversification across different assets and strategies. Never go all-in on one vault.
It depends on your time horizon. If you're okay with locking up capital for longer periods, some of the deeper OTM put selling can be relatively safe for collecting premium, but still not truly 'risk-free'.
Tail risks are the name of the game here. You really need to understand the liquidation mechanisms and potential for de-pegging if you're playing with stablecoin yields or LP positions. Have you modeled extreme scenarios?
I find the UX on some of these platforms still needs improvement, which adds another layer of operational risk. Have you had any issues with executing trades or withdrawing funds during periods of high network congestion?
I've dabbled in Ribbon's covered calls. The yields are definitely eye-catching, but I agree, the impermanent loss on the underlying can eat into those gains quickly if the market moves against you. Hard to call it consistent alpha.
For put-selling, it's all about strike selection and collateral management. I usually go OTM and only on assets I wouldn't mind accumulating anyway. It's more of a yield enhancement strategy than a pure alpha play for me.
Consistent alpha from structured products in DeFi is a tough nut to crack. The high yields often mask the underlying volatility. Are you factoring in gas fees and potential slippage on entry/exit too?
Yields are attractive, but the question is, how much of that is sustainable premium and how much is just amplified volatility? I'm skeptical of anyone claiming consistent alpha from these without a very sophisticated hedging strategy.