ZETA is a fast, liquid, under-collateralized DeFi derivatives trading platform built on Solana. Zeta’s mission is to provide a bulletproof future and options trading ecosystem to its users utilizing the Serum order book. Zeta has utilized Solana’s 400ms block time strategy to update and monitor the trading positions multiple times per second. Zeta also provides an under-collateralized and deep liquidity trading experience to their users compared to conventional centralized exchanges. They utilize the Black-Scholes-Merton pricing model for fair value evaluation of options contracts. Their trading platform is user-friendly and they provide 22 option contracts to trade. They also charge a minimal fee and also have a sub-second response time in their trading platform.
Let us first understand the different technical terms.
As the name speaks, derivative means derived from something, so here derivatives are based on underlying asset or index. Trading a derivative predefines the risk for the user. Zeta provides future and options derivatives to be traded on their platform
Options are put and call contracts that give the user to buy or sell them at a given price at a certain point in time. You can buy the call when you think that the stock will rise or you can buy the put when you think the stock will fall. The put and call contracts come with an expiry date and can be of different strike prices. These are the two variables with which the put and call contract prices change apart from the underlying asset price.
Let us understand it with a simple example, consider SOL-USD (underlying asset) currently trading at $99. So first we will discuss the strike prices by keeping a single expiry date, so from the below table 1, it can be seen that there are multiple strike prices like 85, 90, 95, 100, 105, 110, 115, etc. Every strike price has a put and call option with a specific bid value. The further away the strike price from the CMP (current market price) of the underlying asset is, the lower its value. So here the user’s risk is predefined depending upon which strike price he/she selects to trade. So in a similar fashion user can select the other expiry dates depending upon his/her risk appetite.
Table : Strike price of SOL-USD for 18th March 22
Futures or future contracts are the legal agreement between the buyers/sellers to trade an asset at a predefined price at the particular expiration/future date. At this particular expiry date, the futures will settle at the underlying spot price. Here the spot price is the CMP of the underlying asset.
Under-collateralization means the user has extra margins to trade with. This under-collateralization helps the user to utilize their skills efficiently in gaining more profits.