squeeth_option_hedge.py

squeeth_option_hedge.py

###
# Hedging options with squeeth (eth^2) and perps
# https://medium.com/opyn/how-to-hedge-options-with-squeeth-b5e30d5d83ac
# https://docs.google.com/spreadsheets/d/1PBwyqmZXGRZoAlgSa9_ZZiUM28J92-vm7mUybH9HsBc/edit#gid=0
#
# Steps:
# 1. Sell oSQTH with the same gamma as the option that was bought
# 2. Buy ETH futures to hedge the delta from the option that was bought and oSQTH that you sold
###

### imports
import mibian

### eth/usd call option
strike = 4000 # strike price of the option
expiry = 30   # time in days till expiry
iv = .9       # annualized implied vol of the option
price = 4000  # price of eth
r = 0         # risk free rate

call = mibian.BS([price, strike, r, expiry], iv*100)

### squeeth calculations
squeeth_delta = 2*price
squeeth_gamma = 2

squeeth_short_amount = (1/squeeth_gamma) * call.gamma # match the gamma on the option
future_long_amount = squeeth_short_amount * squeeth_delta # hedge the squeeth delta

print("Your call option should be hedged with {0} short oSQTH and {1} long ETH futures".format(squeeth_short_amount, squeeth_gamma))

Does this take into account the current Squeeth normalization factor?