LP FAQs

Why is my withdrawal taking longer than the normal 3 days?

Sometimes there may be open option positions that require LP collateral to be locked, reducing the free assets in the pool available for withdrawal. Once the collateral is unlocked, or the positions are offset, generally at the subsequent option expiration date, the withdrawal will be processed.

Why is my deposit or withdrawal not processed even though my cooldown timer is up?

Deposits and withdrawals are processed by permissionless keepers in a first-in-first-out fashion. Deposits may take longer than expected if the deposit requires swapping of a large amount of assets or if the vault has reached maximum capacity.

Withdrawals may take longer than expected due to reasons mentioned above.

Lastly, all withdrawals and deposits are paused within 4 hours of weekly option expiries, at 0800 UTC on Fridays. This mechanism is designed to prevent gaming of pools.

Why can’t I deposit as a liquidity provider even when my trading account balance is non-zero?

There’s a distinction between "trading account" and your wallet. When you deposit and withdraw into an LP position, you are doing so from your wallet. When you want to trade on SDX though, you need to deposit onto the trading account, similar to other perpetual trading platforms.

How is APY calculated?

The Fee APY is calculated by annualizing the 30 day fee generated from trading by the liquidity pool. Fee is defined as the difference between the amount received or paid for an option and the theoretical mark price. This value should generally be positive due to the markup being added by the pool, in addition to capital utilization charges.

How are liquidity pool earnings distributed?

Liquidity pool earnings from fees collected and profitable trades are automatically added back to the pool. Over time, as earnings accrue, the value per LP token increases and auto-compounds.

Does the liquidity pool perform any delta / gamma hedging?

Liquidity pools rely on dynamic option pricing and automated delta hedging to keep pools at a target delta of 0.5.

Dynamic option pricing sets up conditions which buying calls and selling puts will be executed at a favourable price when delta is above target (>0.5) and buying puts and selling calls will be executed at a favourable price when delta is below target (<0.5).

Delta hedging using a keeper network is performed using a pyth oracle to ensure favorable trade execution. Read more about automated hedging here.

In addition, delta is rebalanced on LP deposits and withdrawals.

Gamma risk is primarily managed via open interest caps and trading bands at the moment.