Indexer Reveals Solana’s Best Investment Strategies

Solana explorer provides some compelling investment strategies for the average trader.

Looking for Better Strategies During the Bear

SolanaFM, one of the many promising crypto startups in Singapore, revealed what it says are the best investment strategies involving options in Solana.

Options offer investment opportunities that are often more profitable than regular assets. But many retail investors shy away from them as they don’t put the effort into understanding how they work. 

Mainly, options allow traders to buy or sell assets at a defined price by a set date. This means they have unlimited upside (the difference between the defined price and the actual price, minus a small fee) and limited downside (the small fee).

Source

The indexer analyzed the Solana ecosystem to find the most profitable options strategies and focused on three well-known protocols: Zeta MarketsPsyFinance and Friktion

Are these strategies worth a shot? Are there any better investments? And can options be dangerous? Web3Wire News will summarize the three methods and try to conclude if these are a good fit for you. 

Whale Watching

SolanaFM traced the top-earning wallets in Zeta Markets and the largest accounts in PsyFinance and Friktion using on-chain analytics.

Zeta Markets Strategy

The wallet with the largest PnL increase made +100 trades from June 17 to June 27.

It sold call options, giving buyers the right to buy $SOL at a specified price within a specific time.

The options were not exercised by the expiry date, as $SOL didn’t reach the specified price and was cheaper in the market.

Each trade had an average size of $50,000.

The trader earned +$77,000, with an average of $500 in premiums.

If the trader held SOL over the same period, he would have made ~$12,500.  

Source: Zeta Markets’ Options DEX

PsyFinance Strategy

PsyFinance offers yield through option strategies instead of directly trading options.

Its $SOL covered call vaults allow users to hold $SOL and generate an APY from the options premium.

SOL Call Vault currently provides a 96% APY.

If $SOL remains below the strike price of $48 at expiry in 3 days, the trader will earn  ~1% in SOL. 

If $SOL exceeds the strike price, the trader will incur losses in $SOL. As a result, the options will be executed at the strike price, and the trader will lose some upside. 

To reach the strike price, $SOL needs to increase ~40%.

Many top wallets that use this strategy also track and shift funds between platforms to earn the highest yields possible.

Check out Friktion’s explainer on Covered Call strategies:

Friktion Strategy

Friktion includes Put Selling strategies designed to generate yield on stables in sideways and bull markets.

SolanaFM traced a wallet that holds assets on Friktion’s Covered Call and Secured Put vaults.

Its largest position is worth $88,000 and leverages a Secured Put strategy.

Throughout the analyzed period, $SOL collapsed 80% from $179 to $34.50.

The trader incurred impermanent losses from the Secured Put vaults as the options were exercised below the strike price.

The existing positions in the Call vaults slightly cushioned the trader’s losses. 

This strategy was still safer than simply holding $SOL.

Check out OIC’s explainer on Cash-Secured Put strategies:

Key Takeaways

Regular call options allow buyers to magnify gains in asset prices and sellers to pocket the premium if prices remain flat or decline.

Covered Calls are useful to forfeit some price upside for consistent yield. 

Cash-Secured Puts are useful during low volatility and moderately bullish markets. 

During strong bear markets, if the spot price moves below the asset’s strike price, Covered Calls and Cash-Secured Puts strategies may result in a loss of principal.

Options are risky if buyers don’t use them sensibly: They can lose their investment if the option expires worthless. But they can also offer them very high returns. 

If used correctly, options limit risks while exposing traders to the upside.

Web3Wire News will pay close attention to existing investment strategies on Solana and other L1s to see if they are a better alternative to simply trading the underlying assets.  

What is SolanaFM:

SolanaFM is a user-focused Solana blockchain explorer for simplifying transaction information and money flow visualizations.

Where to find SolanaFM:

Website | Substack | Twitter

Source : web3wire

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