NFTGo Research：2023 NFT options report, on-chain data indicators

This article comprehensively analyzes the data of NFT options in 2023 and provides practical operation guidance.

(Preliminary summary: Jay Chou’s “Fantasy Music Metaverse” airdropped more than 1 million NFT, and you can win concert tickets, signed photos, and out-of-print vinyl records )

(Background supplement: NFT transaction volume in September was the worst in history! But BAYC, Azuki.. bottomed out, is this a bargain hunting opportunity? )

Summary

• Although still in its early stages of development, the NFT options market has grown significantly, with peak trading volume closely related to floor price fluctuations in some NFT series.
• Wrapped Cryptopunks, Bored Ape Yacht Club and Pudgy Penguins are the three NFT series with the largest share of options trading, accounting for 55.68% of the total market share.
• On average, more than 20 NFT options are traded each week, but only about 6 NFT options are exercised.
• The NFT options protocol provides lower-cost exposure for high-value NFTs, allowing traders to better control price trends.
• NFT options enable you to bet on price movements for a fraction of the actual cost of the NFT (as low as 0.01 ETH).
• NFT options trading is affected by market fluctuations, which are affected by floor price data, trading volume, liquidity, NFT market capitalization, blue chip NFTs, and market sentiment.
• The reduction in trading volume exposes the market to potential manipulation risks. Traditional pricing models such as the Black-Scholes Model may not be suitable for the unique return distribution of the NFT market.

Chapter 1: Introduction

2021 marked the explosive growth of NFTs, with projects proliferating and transaction volume exceeding 1 million ETH. Non-fungible tokens (NFTs) have taken center stage in the world of blockchain transactions. As NFT has developed from social avatars and keys to speculative assets that are heavily traded and speculated, its tools and methods have become more complex. As the industry matures, we slowly transition from speculative bubbles to sustainable expansion. This process is accelerated by the increased diversity and usage scenarios of NFTFi.

Derivatives are one such tool that has quickly become popular in the field of NFT trading. In this report, we will delve into the current status of NFT options, explore their mechanisms, provide data analysis, and explore the potential benefits for traders and NFT creators.

In the current bear market, NFT options provide users with new opportunities to participate and obtain liquidity. For newcomers, it is an easy entry into the NFT ecosystem.

To understand this emerging market, NFTGo partnered with Wasabi, Hook and Global Coin Research to publish the first comprehensive NFT Options Report. This report covers everything from market overview to outlook, options mechanisms to industry insights.

Chapter 2: Overview of NFT Options

Options are a type of financial derivative that have been a mainstay of the traditional finance industry for decades. These advanced financial instruments give the holder the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a predetermined price within a specified period of time, allowing traders to trade without fully owning the asset. Take advantage of potential price movements. In exchange, the option buyer pays the option premium to the seller. Depending on market conditions, the holder can choose to exercise the option or let it expire at any time, making options an extremely versatile tool in hedging, speculation, and risk management strategies.

Why choose to buy NFT options instead of NFT itself?

For various reasons, people may prefer to purchase NFT options rather than the NFT itself. First, options allow investors to participate in the potential price appreciation of NFTs without having to own large amounts of NFTs. Second, options provide a certain degree of downside protection, as the maximum loss is limited to the option premium paid. Third, options provide greater flexibility, allowing the holder to freely decide whether to exercise the option or let it expire based on prevailing market conditions. Additionally, options allow investors to hedge against the risk of falling prices and provide speculators with a way to profit from falling prices. Finally, traders can profit from short-term price fluctuations through options without holding NFTs long-term. Therefore, NFT options are particularly attractive to investors with speculative purposes and risk management strategies.

Terminology explanation

• Exercise price: The pre-agreed price at which the NFT can be bought or sold.
• Expiration date: The last day on which the option contract holder can exercise his or her right to buy or sell the NFT at the strike price. If no action is taken, the contract will expire worthless.
• Premium: The price an investor pays to purchase an option contract from the issuer. Royalty pricing is affected by various factors.
• American Options: American options can be exercised at any time before the expiration date.
• European Options: European options can only be exercised on the expiration date.

Extended reading: Tutorial for newbies | Common terms for getting started with options, registration to first transaction, sharing of practical experience

mechanism

call option

Call options speculate that the price of the NFT underlying will appreciate within a specified time frame and allow the buyer to purchase the underlying at a specified price and date. \
example

Assume that the current floor price of Azuki NFT is 5ETH. If you are bullish on the price of Azuki and want to take advantage of potential price increases without purchasing the NFT directly, you may choose to purchase a call option. In this case, your option exercise price is 5.5 ETH, the expiration date is two months from today, and the option premium is 0.2 ETH.

In order to obtain the option, you need to pay an option fee of 0.2 ETH to the option seller to obtain the exclusive right to purchase Azuki NFT within the next two months (American option) or expiration date (European option), no matter what the floor price is at that time . This way, you can profit from the potential increase in price without directly owning the NFT.

Extended reading: NFT is picking up! Azuki breaks through 5 ETH, big investors say: 900 bids (BID) have been established on Beanz

Scenario 1: Floor prices rise

Six weeks later, Azuki’s floor price has soared to 6.5 ETH, and the value of your option has increased accordingly. At this point, you have three options:

You can choose to exercise the option and pay 5.5ETH to obtain Azuki NFT. After owning this NFT, you can sell it at the current floor price of 6.5 ETH, thereby making a profit of 0.8 ETH (earn 1 ETH – invest 0.2 ETH). The return rate is as high as 400% compared to the initial investment. Some platforms offer arbitrage tools and, with the help of flash loans, allow users to execute this procedure without upfront capital.

Alternatively, you could decide to sell the option at the new premium of 0.7 ETH. In this way you will get a profit of 0.5ETH, and the return on investment is still as high as 250%. The advantage of this method is that you don’t need to have 5.5ETH ready to buy NFT at all times, but you can still benefit from its price appreciation.

Alternatively, you could choose to continue to hold the call option in the expectation that the floor price will continue to rise further in the remaining two weeks. You are taking a weighed risk at this point, because if the price of the NFT continues to soar, it has the potential to lead to higher profits.

Scenario 2: The floor price is lower than the exercise price

Two months later, Azuki’s floor price failed to reach 5.5ETH. In this case, you are not obligated to buy the NFT at the price of 5.5 ETH, but you will lose all the premium. Therefore, the maximum loss will be 0.2ETH.

put option

Put options speculate that the price of the NFT underlying will depreciate within a specified time frame and allow the buyer to sell the underlying at a specified price and date. \
example

Assume that the current floor price of Azuki NFT is 5 ETH. Let’s explore a situation: you are bearish on Azuki and want to profit from the decline in floor price. To execute this strategy, you would purchase a put option with a strike price of 4.6 ETH and an expiration date of two months in the future. The cost (premium) to purchase this put option is 0.2 ETH.

Scenario 1: The floor price drops below 4.6ETH

Six weeks later, the Azuki NFT floor price dropped to 4 ETH, causing the value of your put option to increase to 0.45 ETH. Now, you have three options:

You can choose to buy Azuki NFT at the current floor price of 4 ETH, and then exercise the put option to sell the NFT back to the issuer at a price of 4.6 ETH. This move will generate a profit of 0.4ETH - the spread of 0.6ETH minus the option purchase price of 0.2ETH.

Alternatively, you could decide to sell the option at 0.45ETH, making a net profit of 0.25ETH.

The third option is to continue to hold put options and wait for the floor price to fall further, thereby obtaining greater potential gains.

Scenario 2: The floor price remains above 4.6ETH

Two months later, the option expired and the floor price was still higher than 4.6 ETH. The good news is that you are not obligated to sell the Azuki NFT, so the price difference will not cause you a loss. However, there is a problem - you will lose the entire premium spent to purchase the option, totaling 0.2 ETH.

Existing platform

The NFTFi space is still in its early stages, so there are only a few fully functional platforms offering NFT options trading. For those keen to explore NFT options trading, there are still some options. Each platform has slightly different features and functionality, allowing users to choose the most suitable one based on their needs and preferences.

Chapter 3: Analysis of key data of NFT options

Although young, the NFT options market has witnessed significant growth and resilience. Some platforms have entered this field, and market development remains generally optimistic.

Trends and Patterns in NFT Options Trading

On average, more than 20 NFT options are traded every week, but only about 6 NFT options are exercised. There was a sharp spike in the week of July 2, and the number of options issued by Wasabi soared to 55.

A closer look at NFT option spikes in trades and exercises reveals that these spikes appear to be closely correlated with floor price swings in some of the top NFT series.

For example, a surge in options trading on July 2 coincided with a drop in floor prices for collections like Azuki and DeGods. Azuki’s floor price began to decline in late June, with DeGods following in early July, and investors appear to be looking to options as a strategy to reduce potential risk. The rise in options trading from mid-August to early September also followed this pattern. Therefore, using options to hedge the unpredictability of NFT prices is an investment strategy.

Extended reading: Brother Moji sells 372 DeGods! Losing Money Posting: Welcome to Hell

Lil Pudgys is another NFT series that has had a significant impact on options trading volume. When Lil Pudgy’s floor price began to rise in September, options trading volume surged accordingly, and a clear correlation emerged between the two. Specifically, on September 24 and October 4, Lil Pudgys’ floor prices increased significantly by 10% and 20% respectively. Coinciding with the price jump, options trading volume also peaked at 27 and 25 trades respectively. This shows that options are not just a hedging mechanism that investors seek during market downturns. On the contrary, options are also an attractive investment channel during bullish phases of the market.

By extension, there is a clear correlation between options trading activity and spot trading when comparing options trading volume and overall market trends. In layman’s terms, when the regular NFT market is volatile, the options market is also volatile. This correlation is not unusual. In traditional finance, options tend to be a barometer of underlying market sentiment, reflecting broader trends and traders’ prospects.

In summary, although the options market is actively issuing options, there are still fewer options that are converted to exercise. This gap is evidence that traders are hedging bets or speculating on future price movements, rather than taking immediate advantage of options.

Market share dynamics

When delving into the NFT options market, it is undeniable that certain series lead the way in terms of total available liquidity (TAL). Among them, “Wrapped Cryptopunks”, “Bored Ape Yacht Club” and “Pudgy Penguins” are the three leading NFT series, accounting for a combined market share of 55.68%. This dominance highlights the influence and popularity of these series among NFT options.

“Wrapped Cryptopunks” has a TAL value of 847.32 ETH and seems to be the market leader. It is followed by “Bored Ape Yacht Club” and “Pudgy Penguins” with TALs of 802.05 ETH and 360.76 ETH respectively. The huge market shares occupied by these three series indicate their pivotal role in the options market and perhaps their broader appeal in the NFT field.
While these series dominate, it is worth noting that the remaining NFT series collectively account for approximately 44% of the market share. This distribution shows that while the top collections play an important role, there is ample room and potential for other collections to grow. Therefore, despite the influence of major players, the NFT options market remains a dynamic one with both established collectibles and emerging competitors.
In mature financial markets, derivatives trading volume is more than 30 times that of the stock market. Derivatives, especially options, will continue on this growth trajectory.

The number of active option users has grown steadily, with the number of active users in the NFT options market increasing from zero to more than 140, with the total available liquidity exceeding 3,000 ETH. Notably, Wasabi’s user base surged 150% every month from June to July.

Chapter 4: How to Trade and Use Options Strategically

Protect holders from severe price fluctuations

Buy NFTs on a low budget

Access to high-value NFTs at low prices is one of the biggest breakthroughs in NFT options protocols. Traders can tap into the price movements of the most popular collections at a fraction of the cost.

June 2023 is a critical and tumultuous month for the 0N1 Force series. Traders can take advantage of these huge price swings without pre-collateralization.

Here is a real-life example of making money through options:

On June 5, 2023, 0N1 Force was trading at a floor price of 1.3 ETH following some key announcements. A smart trader anticipates that the price will continue to rise and therefore purchases options for a fraction of the entire NFT. He purchased a call option with a premium of only 0.047 ETH, with an exercise price of 1.3 ETH.

In just a few hours, the floor price of 0N1 Force rose to 1.54 ETH, at which time the enterprising trader decided to exercise the option at this price.
In the end, the trader paid 0.047 ETH, caught the upward price trend of the 0N1 Force series during the volatile period, and made a profit of 0.193 ETH in just a few hours, or a 410% return in less than a day. .

Without options contracts, it would be impossible to realize this upside risk at such a low cost. This case also demonstrates the huge potential of this type of protocol.

Hedging risk when prices fall

Hedging is a key concept in all market risk management, and options provide an excellent way to do so. Broadly speaking, this type of risk management tool does not exist in the cryptocurrency market, which is why put options are a groundbreaking innovation.

Let’s take a look at an example: Trader No. 2 sold Nakamigo at a price of 0.4ETH when the floor price fell to 0.279ETH.

In the days following the launch of the Nakamigos series in May 2023, there was a staggering increase in floor prices for the initial free casting series. Traders hoping to hold Nakamigos can use put options to hedge new gains without having to liquidate the original NFT. .

On May 27, the floor price of Nakamigos rose to 0.44 ETH, and smart traders took advantage of this opportunity to hedge their positions. They bought Wasabi’s put option at an exercise price of 0.4ETH, with an early premium of only 0.0325ETH.

Over the next 15 days, the price of Nakamigos continued to fall, reaching a low of 0.279 ETH on June 10. However, since the trader has the ability to hedge their position on Wasabi, their put option gives them the right to sell one Nakamigo for 0.4 ETH.

Traders can use Arbitrage Flow, an internal tool, to use flash loans to buy NFTs on the open market at a lower price, then exercise the option to sell them back to the fund pool and make a profit.

In this case, the trader took advantage of this method and made a profit of 0.089ETH, which is a 296% return in just two weeks, even though the initial investment was only 0.0325ETH, without having to sell their NFT.

This case study demonstrates that put options can successfully hedge against market declines without selling the NFT.

Extended reading: Nakamigos has become a popular NFT, interpreting multiple derivative projects Dogemigos, Magamigos…

Hedging newly issued NFTs

Judging from past experience, every time NFT artwork comes out, it will cause large periodic fluctuations, often downwards.

Azuki launched Elementals during one of the most unstable times in NFT history. There was a lot of hype around the project, but without put options, holders had no way to hedge against a price drop in the original collectible. Fortunately, some market participants have successfully done this using our protocol.

On June 24, 3 days before the announcement of Elementals, a trader purchased a 1-week put option with a premium of 3.93 ETH, with an exercise price of 17 ETH, and reserved the option to sell it at that price. An Azuki right. After Elementals was officially announced, Azuki’s floor price dropped all the way to 9 ETH.

On June 30, the trader exercised the option and locked in a profit of 4.07 ETH, achieving a 103% gain in just 6 days. He successfully used put options to hedge against a downside move in the floor price, something that had not been possible before.

No need to buy NFT to bring profits to traders

Bet on the market with a small payout

The magic of NFT options is that for a fraction of the actual cost of the NFT (as low as 0.01ETH), you can take a huge risky position and bet on price fluctuations. There are many such examples, as follows:

On May 12, 2023, a trader took advantage of the ability to bet on large price movements and bought a 1-week call option on 0N1 Force for a premium of only 0.02 ETH up front. At the time of purchase, the floor price of the series was hovering below 0.6 ETH, and the trader purchased a call option with an exercise price of 0.6 ETH.

In less than a day, the floor price of 0N1 Force rose to 0.85 ETH, at which point traders decided to exercise the option to make a profit. By using Wasabi, this trader made a profit of 0.23ETH on an initial investment of only 0.02ETH, creating an astonishing 1150% return in a few hours.

Options are particularly suitable for use in NFT scenarios because they are useful for both long-term holders and active traders.

An NFT trader recently purchased Pudgy Penguins options on Hook for 0.0864ETH (approximately $160). One month later, the trader sold the option for 0.4 ETH (approximately $750), earning a return of 0.3136 ETH (363%).

Traders purchased options when the floor price of Pudgy Penguins was approximately 3.4 ETH. In the following month, the floor price of Pudgy Penguins rose to 4.3 ETH, causing the options to be at a loss.

If a trader buys a Pudgy Penguins at the floor price at the same time and then sells it, they will earn 0.9 ETH (26.5%). While the ETH amount will be higher, in percentage terms their return will be much less.

Earn upfront royalties

NFT holders can earn income by creating and selling call options. If the NFT holder believes that the value of the NFT will increase, but not exceed a certain amount, they can sell the call option and earn a premium, which they can keep regardless of how the price moves.

For long-term NFT holdings, selling call options is a great way to increase returns.

On July 15, a Milady holder minted and sold an option for 0.149939ETH. The exercise price of this option is 2.8 ETH and will expire on August 11, 2023.

Assuming no money is made when the option expires, the Milady holder can replicate this strategy repeatedly and earn a large amount of ETH within a year.

Chapter 5: How to find opportunities in volatility

In the NFT market, volatility is often seen as a challenge, but it also presents unique opportunities. NFT options provide a way to ride volatility, allowing market participants to speculate on future price movements for profit or to hedge their investments, much like options in traditional financial markets. The innovative use of options in the NFT space highlights their importance as a strategic tool that can minimize risk and increase potential profits.

To understand NFT options and utilize them effectively, you must have the ability to perceive key market signals and make predictions based on data. This requires analyzing a large amount of market data, such as price data, trading volume, liquidity, market sentiment, market capitalization, as well as advanced techniques such as Relative Strength Index (RSI), Natural Logarithm of Return (LnR), Hypothetical Volatility Index and Sharpe Ratio. index. Through this lens, we delve into the volatility of the NFT market and explore how data-driven decision-making can empower NFT options traders.

Detect market volatility signals

To identify potential volatility in the NFT market, several indicators need to be measured:

• Price data: Large price movements can signal market volatility. For example, if the price of an NFT fluctuates significantly over the course of a day or week, it may indicate greater market volatility. Traders can profit from this using NFT options.
• Volume: A sudden increase or decrease in trading volume can be a sign of impending volatility. High trading volume usually means greater price movements. For example, if the trading volume of a certain NFT suddenly increases, this may be a precursor to a large price movement. Options traders can use this information to buy options in anticipation of price movements.
• Liquidity: Lower liquidity leads to greater volatility because smaller trades have a larger impact on price. This provides options traders with the opportunity to take advantage of potential price differences. For example, if an NFT has low liquidity, a small amount of buying could significantly increase its price. Traders may anticipate this and buy call options in hopes of profiting from the price increase.
• Market Cap: NFTs with smaller market caps may exhibit higher volatility, providing options traders with the opportunity to benefit from these price movements. For example, a trader might discover an NFT with a relatively small market cap but strong fundamentals. By purchasing options, they can profit from potential price movements without investing large amounts of money in the NFT itself.
• Blue-chip NFTs: Blue-chip NFTs refer to NFTs that have established a solid reputation for quality, reliability, and the ability to make money in good times and bad. Because they are stable, they tend to fluctuate less. Therefore, the overall trend of the market can usually be seen from the fluctuations of blue-chip NFTs. When blue-chip NFTs fluctuate, people can predict the direction of fluctuations in their collections.
• Market Sentiment: Market sentiment refers to the overall attitude of investors towards a particular market or asset. Market sentiment is often driven by news events, product releases, or other events that impact the market. For example, if there is good news about a specific NFT or its issuer, it will drive bullish sentiment, potentially increasing the price of the NFT. Options traders can take advantage of this and buy call options in anticipation of price increases.

Understanding and accurately interpreting the signals of the NFT market is an essential first step towards efficient options trading, which requires careful analysis of various indicators such as price data, trading volume, liquidity and market capitalization. In addition to these quantitative indicators, focusing on qualitative factors such as market sentiment and the reputation of blue-chip NFTs can also provide valuable analysis of potential market fluctuations. By effectively detecting these market signals, traders can use market volatility to their advantage, whether speculating on future price movements or hedging against potential losses, and adopt strategies accordingly.

Data-driven forecasting

In order to effectively navigate the NFT market and profit from it, traders need to predict market trends and make decisions, which requires a comprehensive analysis of various market data and indicators.

• Relative Strength Index (RSI): RSI is a momentum indicator used in technical analysis to measure the speed and variability of price movements, where “RS” is the average rise during up periods divided by the average decline during down periods over a certain time frame. An RSI above 70 usually indicates that the NFT is overbought, indicating that it may be overvalued and the price may be subject to a correction. Conversely, an RSI below 30 usually indicates that the NFT is oversold, indicating that it may be undervalued and the price may rise. Therefore, options traders can speculate on these potential price corrections by buying put options when the RSI is high and buying call options when the RSI is low.
• Natural Logarithm of Return (LnR): The natural logarithm of return allows traders to simulate price changes over time, with larger returns indicating higher volatility. For example, if traders observe an upward trend in the natural logarithm of returns on NFT prices, they may predict a period of high volatility in the future and buy options to profit from predicted price movements.
• Volatility Index: A hypothetical volatility index, similar to the VIX index in traditional markets, that measures expected future volatility. Higher volatility drives up option premiums, creating opportunities for option sellers. For example, if an index indicates high future volatility, traders may create options to collect higher premiums, especially if they believe actual future volatility will be lower than the volatility indicated by the index.
• Sharpe ratio: Sharpe ratio = (expected investment return – risk-free interest rate) / standard deviation of investment return. The Sharpe ratio is used to understand how an investment’s return compares to its risk. A higher Sharpe ratio indicates better risk-adjusted returns. For example, if a trader compares two NFTs and one of them has a higher Sharpe ratio, they may choose to purchase options on that NFT because this suggests a better risk/reward alignment.

As an integral part of risk management, NFT options protect traders from both price declines (via put options) and potential price increases when selling an NFT (via call options).

In summary, while volatility in the NFT market poses challenges, it also provides unique opportunities for strategic profitability. By thoroughly understanding market signals and making data-driven predictions, traders can effectively utilize NFT options to reduce risk and potentially maximize returns in this booming, dynamic market.

Chapter 6: Current challenges and risks

NFT options are certainly an interesting innovation, but there are still some issues to consider during widespread adoption. One is liquidity. The NFT market is quite fragmented, as most collections only have 10,000 pieces. Outside of the most popular collections, it is difficult to create sufficient liquidity for NFT projects.

Another consideration surrounding NFT options relates to the depth of trading volume in the relevant NFTs. This has the potential to lead to manipulative behavior (or what some call highly profitable trading strategies). A trader can own an NFT, buy a downside put option on the project, and then list the NFT at a price below the floor. The opposite is also true - if the floor price is low, a trader can buy a call option and then buy the NFT. It is important to monitor open interest, liquidity, and collection volume relative to floor price thickness.

In addition, pricing accuracy is also critical and is another important factor. Options have traditionally been priced using the Black-Scholes Model. However, this model assumes that the returns on the underlying assets are normally distributed.

According to NFTGo data, we can see the distribution of daily floor price changes in two popular NFT series, CryptoPunks and Bored Ape Yacht Club.

As you can see, the daily returns denominated in ETH of CryptoPunks and BAYC are not normally distributed, but have varying degrees of skewness and kurtosis. The lack of a normal distribution affects the ability of the Black-Scholes Model to correctly price option contracts.

Chapter 7: The future of NFT options

Derivatives are an extremely important innovation in the operation of capital markets. They are a way for traders to speculate, hedge and manage risk across asset classes.
The cryptocurrency market is still in its infancy, but it is developing rapidly. At Wasabi, we believe that as the industry continues to move forward, non-fungible tokens will become a potential explosion point for cryptocurrencies and Web 3, reflecting the nature of real-world assets and collectibles themselves. In order for non-fungible digital assets to further grow as an industry, infrastructure is necessary. It can promote the steady development of the market, introduce appropriate liquidity, and increase the overall benefits. That’s why we built the Wasabi Protocol.

We are already very familiar with the fact that NFTs are inherently illiquid, have large differences in value-added, and are not suitable for splitting. At present, options are still the best way to increase liquidity and establish a solid market structure to introduce large investors. Wasabi’s options are physically settled, do not involve any synthetic instruments that can be manipulated, and do not lead to cascading liquidations like other models with similar purposes.

As the market for non-fungible assets continues to grow, the derivatives market will continue to grow, eventually surpassing the spot market in terms of trading volume, just like traditional markets. The role played by options is crucial, which has been very obvious a few months after the launch of Wasabi Protocol.

As we expand into new markets such as gaming, real-world assets, and the entire non-fungible commodity space, we are very excited to see how market participants create new scenarios using this novel financial instrument.

Today’s options promote capital efficiency for holders, but are inefficient for creators. Option holders take advantage of the natural leverage of options to obtain higher-risk positions relative to the amount of capital they invest, without any reliance on Oracles or the need for liquidation. In today’s market, the NFT underlying must be deposited before an option can be created, thus greatly increasing the option price. The main reason is that the asset is locked until expiration, making option creation more difficult.

Extended reading: What is an Oracle? Why is smart contract and DeFi important? Function & risk sorting

The next generation of NFT options protocols will not face this problem. The options market shows that there are many options available: Panoptic is creating options based on existing AMM LP positions, Aevo is building synthetic options, and Aori is implementing a fully collateralized margin system to solve this problem.

Once a solution is found, liquidity in the options market will no longer be limited to the circulating supply of tokens. Options will drive the growth of the entire derivatives market and even become a key to stabilizing the collection market, because active traders will be able to more effectively obtain risky positions through the derivatives market without the need for constant spot trading.

Finally, options will be combined with other NFT financial instruments to form complex positions. Lenders can use options to hedge, further compressing the annual interest rate on the loan. When people borrow money, they also buy options and use the option proceeds to pay interest payments.

Disclaimer：

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