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2023-02-25 10:02:02+00:00

How do options contracts work?

There are two basic types of options, known as puts and calls. Call options give contract owners the right to buy the underlying asset, while put options confer the right to sell. As such, traders usually enter into calls when they expect the price of the underlying asset to increase, and puts when they expect the price to decrease. They may also use calls and puts hoping for prices to remain stable - or even a combination of the two types - to bet in favor or against market volatility.

An options contract consists of at least four components: size, expiration date, strike price, and premium. First, the size of the order refers to the number of contracts to be traded. Second, the expiration date is the date after which a trader can no longer exercise the option. Third, the strike price is the price at which the asset will be bought or sold (in case the contract buyer decides to exercise the option). Finally, the premium is the trading price of the options contract. It indicates the amount an investor must pay to obtain the power of choice. So buyers acquire contracts from writers (sellers) according to the value of the premium, which is constantly changing, as the expiration date gets closer.

As the name suggests, options give an investor the choice to buy or sell an asset in the future, regardless of the market price. These type of contracts are very versatile and can be used in various scenarios - not only for speculative trading but also for performing hedging strategies.

2023-02-24 15:43:01+00:00

Discipline in the markets is the bridge between goals and

accomplishment.

2023-02-23 15:35:15+00:00

" First rule of trading: everything is your fault! The sooner you accept this, the sooner you can work on improving the quality of your decisions"

2023-02-22 15:38:01+00:00

Educational Post 📚

2023-02-20 11:50:15+00:00

2023-02-17 18:27:02+00:00

How to prevent Flash Loan Attacks?

There are various ways to prevent Flash Loan Attacks.

Decentralized Oracles : Decentralized oracles use multiple sources to find out the actual prices of the cryptocurrency. Umbrella Network is a decentralized oracle that ensures reliability of data by committing them on the blockchain. If an attacker tries to perform a flash loan attack on a dApp that sources its feeds from a decentralized oracle, then the manipulation will fail. Moreover, the transaction time will elapse and the entire transaction will be unprocessed.

High-Frequency Pricing Updates : This technique is simple but expensive. In this technique the frequency of the number of times the liquidity pool queries an oracle for fresh price will increase. With more updates, the price of the token within the pool will be updated faster, invalidating the price manipulation.

2023-02-16 07:48:01+00:00

2023-02-15 10:02:02+00:00

Educational Post 📖

What Are Options Contracts?

An options contract is an agreement that gives a trader the right to buy or sell an asset at a predetermined price, either before or at a certain date. Although it may sound similar to futures contracts, traders that buy options contracts are not obligated to settle their positions.

Options contracts are derivatives that can be based on a wide range of underlying assets, including stocks, and cryptocurrencies. These contracts may also be derived from financial indexes. Typically, options contracts are used for hedging risks on existing positions and for speculative trading.

2023-02-14 06:47:01+00:00

2023-02-13 16:49:01+00:00

"As a trader, your job is to befriend uncertainty! "

2023-02-12 15:36:02+00:00

Dark Cloud Cover and Piercing Line

• The dark cloud cover is a two-bar pattern where the second bar closes higher than the first and is black versus white in the first bar

• The piercing line is the opposite of the dark cloud cover in that the second bar is white and lower than the first bar which is black

• The dark cloud is thought to be a downward reversing pattern

• The piercing line pattern is thought to be an upward reversing pattern

2023-02-12 05:21:02+00:00

THE FIRST FLASH LOAN ATTACK

During this attack, the borrower took an ether flash loan on dYdX, a lending decentralized application. Further, they divided this loan and transferred it to other lending platforms like Compound and Fulcrum. On Fulcrum, the attacker used a part of the loan to short ETH against wrapped Bitcoin (WBTC). It means Fulcrum had to take over WBTC.

This information was exposed on Kyber, another DeFi protocol. This protocol filled the order on a DEX, Uniswap. Uniswap has low liquidity, so the price of WBTC rose significantly. It means Fulcrum overpaid for the WBTC it purchased.

At the same time, the attacker takes a compound loan of WBTC using the remaining dYdX loan.The price dumped gradually, they flipped the borrowed WBTC on Uniswap and were successful in gaining a decent profit. Finally, they repaid their dYdX loan and took over the remaining ETH.

The attacker leveraged five DeFi protocols to manipulate the market. All of this took place when the original flash loan was confirmed. The problem was in the bZx protocol used by Fulcrum. The attacker successfully manipulated the market to trick it into thinking that WBTC was worth a lot more

2023-02-11 17:22:02+00:00

THE SECOND FLASH LOAN ATTACK

Just after a week of the first attack the second flash loan attack took place. The perpetrator took a flash loan and converted it to a stable coin (sUSD). Stable coins take the price of fiat currencies. Smart contracts do not know the cost of stable coins.

When the attacker decided to buy sUSD using borrowed ETH, the price doubled on Kyber. bZx thought sUSD priced $2 instead of $1. The attacker took a much bigger ETH loan that would be allowed on bZx. Then, the attacker repaid the initial flash loan and took off the remaining amount.

2023-02-11 01:37:01+00:00

📝 Educational Post

2023-02-09 03:21:02+00:00

How do they work?

Let’s consider an example where a user borrows $70,000 worth of ETH, a lending protocol will instantly lend the amount to the borrower. But this doesn’t mean it is the borrower’s money. The borrower should hold something with the funds to repay the loan and pocket the excess amount.

For this to work, the process should be carried out faster and the debt should be paid to the protocol in time. If this doesn’t happen, then the transaction will reverse. The blockchain enforces the agreement to repay the debt. Flash loan attackers will look for ways to manipulate the market while abiding by the blockchain rules.

2023-02-08 12:20:17+00:00

What are flash loan attacks?

Flash loans allows the user to borrow as much amount as you want without the need for any collateral. The borrower can take thousands of dollars or even hundreds of thousands of dollars without any collateral or KYC process. In such cases if malicious agents take large flash loans and use them to manipulate the market and hack various DeFi protocols to take the profits at an expense of regular investors and platform users. Such cases lead to flash loan attacks.

2023-02-06 15:35:14+00:00

•False and Failed Breakouts

False Breakout

Price breaks out but almost

immediately returns back

through its breakout price.

Failed Breakout (Trap)

False breakout occurs and

the price then breaks out in

the opposite direction.

2023-02-05 15:20:11+00:00

How does a flash loan work?

Flash loans are unsecured loans. You can ask the lender if you can borrow some amount of crypto and the lender will agree. Then, you need to repay the amount in the same transaction. A flash loan includes three parts where you receive the loan, use the money and repay the loan. All of this happens in a flash.

The transaction will be submitted to the network, temporarily lending you those funds. Now, you can use the funds to do some stuff as long as the funds are back in time. If they’re not, then the network rejects the transaction and the lender gets their funds back. It means that the blockchain always had the funds. Hence, it explains why the lender does not require any collateral from you. A code enforces the contract to repay.

Now, you may be wondering how will it help you? Let’s focus on the part two described earlier where you do some stuff with the funds. The idea here is to include the funds into a smart contract, flip a profit and return the initial loan at the end of the transaction. The ultimate goal of flash loans is to gain profit.

While you gain ample amount of profit from flash loans, it is also associated with some risk such as flash loan attack.

2023-02-04 23:49:01+00:00

•Retracements

Counter Trend Correction

👉Types

• Pullback (on breakout down)

• Throwback (on breakout up)

👉Waiting for

• Don’t always occur

• Performance can suffer when they do

2023-02-04 08:51:01+00:00

•Protective Stops

•Protects Capital

Determines the amount of capital risk before entry.

•Types of placement

👉Filters, such as percent, points, or money

👉Trend line, support or resistance level with filter

2023-02-04 00:19:01+00:00

How to use flash loans?

Flash loans are available on Aave and dYdX platforms. Initially, these loans were used as tools for those tech-savvy enough to use the command line. Basically, a method for developers to send textual commands to a computer. Now, more user-friendly interfaces are also emerging.

2023-02-03 10:50:16+00:00

•Entry Stops

Buy stop orders are used to enter trades once the price breaks out.

2023-02-03 05:19:02+00:00

What are the key attributes of flash loans?

Flash loans are a way to make substantial gains without having to risk your money. These loans have three unique characteristics:

Arbitrage : Crypto traders gain profits through varying prices across various exchanges. Suppose two markets are pricing pizzacoin differently. Exchange A prices the coin at $1 whereas Exchange B prices it at $2. You can use flash loan and call a separate smart contract to buy 100 pizzacoins for $100 on Exchange A, then you can sell them at $200 on Exchange B. You can then repay the loan and reap the difference.

Collateral swap : You can instantly swap the collateral backed by your loan for another type of collateral.

Quick & Instant : Flash loan is instant, as the user will use smart contracts to perform instant trades against the loan lent by the lender. The trade should complete before the transaction ends. The transaction stays for only a few seconds

2023-02-02 16:18:02+00:00

What are flash loans?

A traditional banking system includes secured and unsecured loans. Secured loans are the ones where the user should attach a collateral. Unsecured loans there is no need for a collateral as the loan will be sanctioned based on the user’s CIBIL/CRIF score.

A flash loan is a form of trading where users can borrow an unsecured loan without any intermediary. The smart contract will monitor the transactions and will ensure that the transaction will execute when the user adheres to the rules given in the contract.

The smart contracts are pioneered by Aave, one of the top lending protocols in DeFi. The size of the loan depends on the capital availability in the publicly funded platforms that provide flash loan services.The fees involved in this type of loans is very low (0.09% on Aave).

2023-02-02 05:50:11+00:00

•Breakouts

Violation of Trend Line, Support or Resistance, or previous reversal point. It signifies that a change in buyer and seller behavior and signals the beginning or end of a trend.

2023-02-01 16:50:15+00:00

Techniques for Trading Patterns

• Breakouts

• Entry Stops

• Protective Stops

• Retracements

2023-02-01 09:18:02+00:00

Educational post 👨‍🎓

Flash Loan Attacks

Last year, DeFi platforms experienced several high value exploits. During the beginning of 2020, there were two back-to-back exploits against the bZx platform, which experienced a loss of a total of $1m.

Although the amount is small compared to subsequent exploits, it was for the first time that the flash loans were used in a malicious manner. Rest of the year saw various other hacks such as Harvest Finance and Pickle Finance losing $34m and $20m respectively.

A substantial number of these hacks used flash loans to manipulate multiple DeFi platforms for instant profit. You may be wondering what are these flash loans.

2023-02-27 15:34:02+00:00

" Everyone gets their ass handed to them by the markets at some point.

Only the best get back up. "