macrocephalopod

Inspired by a @robertmartin88 tweet, my rough framework for understanding the OMG/BOBA airdrop was that OMG behaved like a stock going ex-dividend, ie it would drop by the value of BOBA just after the snapshot was taken for the airdrop.

I only really figured this out about two days before the airdrop, and I didn’t trade it — but it’ll be useful for thinking about similar situations in the future.

Two important differences between OMG and (FTX) perpetuals on OMG — 1. the spot qualified you for the airdrop and the perps didn’t 2. The perps pay funding and the spot doesn’t. With a bit of backward induction and no-arbitrage reasoning you can get an implied value for BOBA.

One hour before the airdrop the perp should trade close to the expected post-airdrop value of OMG. Say OMG is at 18 and the expect value of BOBA is 5, then the perps should trade around 13.

But at such a huge discount you would get a big funding payment for being long — so the perps would actually trade a little higher to account for that, say 13.25 (you can solve to get an exact value)

Two hours before airdrop you have a similar situation, except you would get two hours worth of funding payments, so the perps trade a little higher, say 13.49 (the next funding payment isn’t as much as the one in the final hour)

You can keep going backwards to get the value that perps would trade at N hours before the airdrop, given the OMG spot price and the expected value of the BOBA token.

All this is conditional on knowing the expected value of BOBA which you obviously don’t know — but by observing current spot and perp prices you can get the market implied value by finding the number which would give the current perp price, under the above backward induction.