*this* is missing the key part of IL.
If price of A/B goes from 200 - 190 and you’re AMM-ing A/B, you don’t buy A @ $190. You buy it at $200.
The problem with IL isn’t the mean reverting met. It’s that you get picked off to moves, trading post-move at the pre-move price. t.co/cHh5xRu6uf
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Have seen you incorrectly say this a few times now.
You don't buy at 200 or 190. You buy a fractional amount at every price between the two for an average execution rate somewhere in between.
In a $100M pool a trade from $200 to $190 executes at an average rate of $194.94
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Ya the truth is really somewhere in between--
you start buying $200. You keep buying at decreasing prices until people stop selling.
Prob that's a bit before 190.
But more generally -- anything other than "buy all at 190" is negative marked to the post price.
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