Case Studies

you have the opportunity to trade with up to 1155x leverage, magnifying your market exposure

Study 3 Scenarios below

Scenario 1 - You go short

117x Leverage

You add a short position of $500 worth of Dec 23 Ethereum Futures.

The 2-year historical correlation for these market is 83%.

• Assume that the margin calculation for the Ethereum is $50.

• The collateral requirement is reduced by the correlated position.

• Margin requirement is $8.50.

Effective leverage for this simple portfolio 117X

Scenario 2 - You go long

291x Leverage

You go long $500 worth of Dec 23 Bitcoin Futures.

You buy a Put Ladder of options to capture downside value, each for $1000 notional.

• Puts 25,000; 23,000; 20,000; respectively.

• Total Notional position, $3500.

The margin on a CEX or DEX with no portfolio risk is circa $350.

• Put option margin requirement produces a delta offset against the future of 76%.

• The margin requirement is reduced to $12.

Effective leverage for this simple portfolio is 
291X and 30 times better than a typical CEX.

Scenario 3 - Options Portfolio

1155x Leverage

Complex market maker portfolio with nearly perfect delta hedging

Long/Short	Instrument	Expiry	C/P	Strike	Amount	Δ	θ	Mark
Long	Bitcoin	Aug 23	C	24 000	$2 000	0.91	-20.46↓	1650.36↑
Short	Bitcoin	Aug 23	C	25 500	$7 000	-0.86	-83.68↓	232.40↑
Long	Bitcoin	Aug 23	C	26 250	$4 000	0.26	-35.48↓	28.47↑
Long	Bitcoin	Aug 23	C	28 000	$2 000	0.01	-1.46↓	7.73
Long	Bitcoin	Aug 23	P	23 000	$3 000	0.00	-0.22	10.30
Short	Bitcoin	Aug 23	P	25 000	$4 000	0.05	-32.38↓	43.22↑
Long	Bitcoin	Aug 23	P	27 000	$1 000	-0.96	-22.59↓	1121.38↑
Long	Bitcoin	Aug 23	P	27 500	$5 000	-0.96	-22.59↓	1121.38↑

A typical liquidity provider on options

Provides prices across the entire market, and generates a series of options trades as users trade. These result in a portfolio of trades. Let’s envisage a typical 1-month market maker portfolio

Against this 1 month of options portfolio

The market maker holds a Long $8800 Aug 23 Bitcoin Futures position.

• The portfolio is delta-hedged, the future offsets the margin.

• The VaR calculator will produce a small collateral requirement from the theta decay on premiums.

• Here with these short dates net theta is low, a total $16.6 for 2 days.

Gamma, the sensitivity of delta to price changes is also low at 0.14, making only a minor contribution to the margin. Therefore $16 of margin is used for $19,200 of notional value.

Leverage 1155x, it is only with this approach that market-making options on-chain become cost-effective.

Leverage Comparison Across Scenarios

Why different Leverage Values?

• Options Portfolio (1155x): Achieves the highest leverage through perfect delta hedging and comprehensive risk management across multiple positions.

• BTC Long + Put Ladder (291x): Leverages Bitcoin's low-risk parameters and uses options to create a 76% delta offset.

• ETH Short (117x): Uses market correlation (83%) to reduce margin requirements, but achieves lower leverage due to Ethereum's higher risk parameters.

The key factors enabling higher leverage are:

1. Complete portfolio risk offsetting (delta hedging)

2. Asset's risk parameters (BTC has lower alpha, beta and gamma than ETH)

3. Correlated positions reducing overall portfolio risk

4. Complex position structures vs. simple directional trades