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11 / we need to understand 1. crypto (specifically alts) are extremely volatile compared to say, US equities, which gives call options IMMENSE value 2. longer duration options are worth MORE $, and don't really relate to long term alignment. because, all risk can be hedged

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12 / so now $SUSHI let's test our methods on some of the #phantomtroupe proposals

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13 / here's

proposing to EXTEND the duration of the option which gives it MORE value and makes $SUSHI project WORSE off 2 yrs, $12 strike: $3.96 5 yrs, $12 strike: $5.73 btw, notice how awful these deals are for $SUSHI like, *really* *really* deep discounts

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13 / here's a guy who gets it! we weren't even competing for this deal but at almost 90% discount (a free 5 yr call option) it's impossible to ignore

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re: @SushiSwap raise, giving VCs a free call option at 3-5x strike for investing in a hugely asymmetric bet at depressed price is even more insane than a discount. This is what @ARKInvest did and almost lost controlling interest as a result pionline.com/money-manageme @jdorman81

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14 / you know who knows how to price options? probably

straight from the tech valley x bain playbook deeply discounted nice guys

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15 / so anyway we have no fish in this tank but can see you're surrounded by sharks and like at least one person in 300 forum posts needs to say 'a free 2 year $SUSHI call option @ 2x strike is actually a 59% price discount' worse than the original (rejected) proposal

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16 / there's a gigantic logic leap that seems to happen with these treasury management deals " oh we can't agree on a price we both understand? then express it to me in a price i definitely don't understand, but you probably do " at least there'll be resolution

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17 / on repeat 'sounds like x, but secretly behaves as y' transformed and bamboozled vampire squid's new summer catalogue namazake

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Replying to

I don't think it's clear that this is the right metric. Say SUSHI is @ $7. Let's say that the deal was "buy 1 SUSHI, get 1 0 strike call for free". You might call this $7 for free, or a 100% discount. But really it's "buy one, get one free" -- a 50% discount, not 100%.

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Replying to

and

I think you should be really computing (value of option) / (value of option + value of SUSHI) to get the effective discount

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Replying to

and

so I think the *maximum* possible number here is a 50% discount, and in practice these are probably more like 25% -- more in line with the original proposal net value wise

12:20 PM · Jul 21, 2021Twitter Web App

old school degen

Replying to

and

You’re right. And it’s a more general problem. How should an issuer value an option it can create - but doesn’t exist without a buyer?

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old school degen

Replying to

and

What usually happens is that the issuer and the buyer split the “new” value created by the option. Maybe the buyer takes 90% of it! Or maybe it takes 10% of it! But either way the issuer is better off than if it didn’t sell the option

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Replying to

and

thanks and think you're right re: being careful with denominator + semantics will express the 2 year option this way: 'pay $7, get $11 of stuff' which is a 1 - 7 / 11 = 36% discount should be equivalent of a 36% TWAP discount

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Replying to

and

Can argue its cheap or rich, just depends on your long term view of implied vol. SUSHI IV = SPX levels in 2 yrs.. right?

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Adam Cochran (adamscochran.eth)

Replying to

and

Got a take on the Smaug SBond concept? Limit downside for Sushi, set favorable interest rate that is likely to expire to the underlying collateral but simplifying the financial instrument a bit for the VC fund folk:

forum.sushi.com

Smaug: Debt Based Treasury Management

TL;DR: Proposal to partner with Sushi, UMA (and possibly Yearn) to build a debt based treasury management protocol on top of Sushi’s ecosystem. Ideally leveraging MISO, Sushi’s AMM and possibly...

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