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Maximizing Profits: Buying ETH Call Options on Uniswap

Brandon Ly

HODL vs. LP vs. Calls β€” which one's best?

  • ⬇️❗HODL downside is substantial (can go to 0)
  • 🧒 LP upside is capped on Uni V3 β€” token goes up, you now hold the other token
  • 🚫🧒 Call options have unlimited upside, capped downside β€” but pay premia

Incoming backtest πŸ‘‡

Backtest Strategy

Let's backtest hypothetical DeFi call options (wen Panoptic? πŸ˜‰)

πŸ—“οΈ Jun '21 - Feb '23

βš–οΈ Periodic rebalancing (day, week, or month)


  • Buy at-the-money (ATM) call option
  • Exercise/close at end of period
  • Pay LP fees as premia

Note: Here’s how Panoptic creates a call option


Return breakdown on ETH daily call options πŸ“ž

  • Payoff: 519%
  • Premia: 397%
  • Profit: 122%

(All values are USDC)


πŸ‘‰Payoff > Premia β†’ ProfitπŸ”πŸ€‘πŸ“ˆ

That's pretty good! How does it compare to other rebalancing periods?πŸ‘‡

Dailies vs Weeklies vs Monthlies

  • πŸŒ• ETH Dailies: 122%

  • πŸ§‘β€πŸš€ ETH Weeklies: 11%

  • πŸš€ ETH Monthlies: 28%


πŸ‘‰Active management for the win!πŸ‘ˆ (Keep in mind this doesn't account for gas feesβ›½ β€” future #ResearchBites πŸ˜‰)

Good returns, but can calls survive a bear market?

Bull vs. Bear Market

  • πŸ‚ Bull Market: June '21 - April '22

    • πŸ‘‰ Compare w/ ETH HODL return: 0.8%
  • 🐻 Bear Market: May '22 - Feb '22

    • πŸ‘‰ Compare w/ ETH HODL return: -41%


Not only did call options survive a bear market, they blew HODL out of the water πŸ’ŽπŸ™ŒπŸ™…πŸ»β€β™‚οΈπŸŒŠπŸ’¨

What if you had chosen another fee-tier?

Different Fee Tiers

  • πŸŒ• ETH-USDC 5bps: 122%
  • πŸš€ ETH-USDC 30bps: 95%
  • πŸ§‘β€πŸš€ ETH-USDC 100bps: 66%


πŸ‘‰The 5 bps pool outperformed, here's whyπŸ‘‡

Here's how different fee-tier pools breakdown

  • 🧾 The 5 bps pool had the least trading fees (premia)
  • πŸš€ The 5 bps pool had the most upward price action


πŸ‘‰ That's why the 5 bps pool was the most profitable!πŸ‘ˆ


Key Insights:

  • πŸ’ŽπŸ™Œ Calls > HODL b/c capped downside
  • 🌊 Calls > LP (we tested this last timeπŸ‘‡)
  • πŸ‚πŸ» Bull markets are best for calls, bear markets were OK
  • πŸš€ Bullish price action = high payoff
  • πŸ’° Payoff > premia β†’ profit!


  • β›½ Ignores gas/spread/swap fees/commission
  • πŸ’² Assumes put option premia = LP collected fees
  • ❓ This is hypothetical β€” you can't buy call options on Uniswap (Panoptic soon 🀫)


  • πŸ“’ None of this should be taken as financial advice.
  • ⚠️ Past performance is no guarantee of future results!