Open Interest Cap

There are four different trade types possible on IVX

• Long call: Trader buys a call option

• Short call: Trader sells a call option

• Long put: Trader buys a out option

• Short put: Trader sells a put option

Both Long Call and Short Put require volatile tokens to be reserved, while Long Put and Short Call require stablecoins to be reserved against them.

To ensure that a combination of trades that offset IVLP exposure to traders' positions is always possible, we limit the exposure to open interest in each of these trade types.

We make the following assumptions ahead of protocol launch:

• The demand for Calls and Puts will fluctuate with changing market conditions and it is important to allow sufficient capacity for this open interest in these positions

• Long option open interest are expected to be in significantly more in demand compared to short option open interest

• Target assumption is that if total open interest is capped, liquidity pool exposure to traders P&L is reduced and will be closely correlated to index price action

Open Interest Cap parameters:

• Buy Call Option Price Factor (reserve): 1 token

• Buy Put Option Price Factor (reserve); 1 token worth of USD at moment of execution

• Sell Call Option Price Factor(reserve); for all assets = 15

• Sell Put Option Price Factor(reserve); for all assets = 15

• Buy Call / Sell Put ratio; for all assets = 1

• Buy Put / Sell Call ratio; for all assets = 1

• Buy Call Token Price Factor; 1^e-17

• Buy Put Token Price Factor; 1^e-17