Understanding Dopex's Atlantic Options: Leveraged Contracts That Won't Be Liquidated
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Understanding Dopex's Atlantic Options: Leveraged Contracts That Won't Be Liquidated
Perpetual contracts without liquidation, loan liquidation protection... Dopex will make all of these possible.
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Author: The DeFi Investor
Translation: TechFlow
Perpetual contracts without liquidation, loan liquidation protection... Dopex makes all this possible. Imagine opening a leveraged position without worrying about the liquidation price—sounds incredible, but Dopex’s Atlantic options make it real.
First, you need to understand how Dopex options work. Atlantic options are European-style options (cash-settled and cannot be exercised before expiry). If you buy a $ETH call option and are already in profit, you still cannot realize gains before expiration.
Unlike traditional options, the collateral for Atlantic options does not get locked and can be used across multiple strategies. When an option buyer uses the collateral (via the Dopex contract), they must pay a fee to the seller.
Thus, both buyers and sellers benefit. Option sellers earn substantial returns, while their collateral remains protected and cannot be stolen, and buyers can utilize the seller's collateral. At expiry, the used collateral is released and returned to the seller.
But how do non-liquidatable contracts actually work?
Suppose you open a perpetual ETH position on GMX (assuming ETH is priced at $1,500) with 2x leverage. Normally, your position would be liquidated if ETH drops to $750.
However, if you simultaneously purchase 2 APs and 2 ACs on Dopex, you can avoid liquidation. The AP must have a strike price above the liquidation price—say, $800. The strike price of the AC, however, does not matter.
Note: AP = Atlantic Put option, AC = Atlantic Call option.
When ETH reaches $800, the AC begins to activate. Dopex automatically transfers collateral from the AC pool to the AP pool. Then, the AP collateral is used to top up your contract position’s margin, eliminating liquidation risk.
During this time, the option buyer starts paying funding fees to the seller. The AP seller faces no risk because their collateral (stablecoins) is now effectively backed by the AC collateral.
Assume you begin closing your position when ETH hits $500. After repaying your debt, you’d be left with approximately $700 (minus the premiums paid for the options and funding fees). So you started with a 1 ETH position worth $1,500 and end up with nearly $700. Without using Dopex for hedging, you would have lost everything. Therefore, non-liquidatable perpetual contracts hold strong appeal for high-leverage traders.
For loan liquidation protection, you need to buy an AP with a strike price above your loan’s liquidation price. When the price drops to the AP’s strike, the Dopex contract automatically uses the AP collateral to reduce your effective liquidation price to zero. This might sound complicated, but all you need to do is click once—Dopex handles the rest to prevent liquidation. The only things you need to check are the AC/AP premiums and expiry dates.
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The DeFi Investor
