Introduction
@gradientdev March 2023
Diem is an options Automated Market Maker (AMM) which facilitates long and short options trading in a permissionless and decentralized way for options with less than 24 hours to expiry. In addition, it acts as a single pool, and offers options on multiple underlying assets which are collateralized by this pool. It is the first step toward unifying option liquidity into a single collateral pool for multiple assets and strike prices. It forms the foundation for expanding the IVX AMM to encompass a broad spectrum of expiry times.
Architecture
IVX is the first protocol to put volatility oracles on-chain, these oracles are periodically pushed updates which contain both asset-market sensitivities β and volatility metrics σ which the Diem AMM has read access to:
The Diem AMM facilitates two-way option markets for daily expiry contracts across many different underlying assets in the same collateral pool.
It also hedges market delta by taking short futures positions through GMX’s GLP pool.
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