Protected Perps
How Protected Perps Is Useful To Traders | How It Works From Technical POV | How to navigate the UX
Last updated
How Protected Perps Is Useful To Traders | How It Works From Technical POV | How to navigate the UX
Last updated
90% of traders lose 90% of their monies. 80% of the traders quit in the first two years. There have been several studies that suggest these pessimistic statistics. One of the key issues is the lack of adequate risk management. Furthermore, even when there are risk management techniques deployed such as stop loss, the losses from one bad trade can require many more profitable trades to break even.
Assuming that the trader skill remains the same, the reality of requiring more trades to make money back exposes traders to consequently more risk of losing money just as much as earning more money. More often than not, a bad trader will lose more often than earn. A vicious cycle can take place. Lose one trade, trade more again, lose more.
Eventually, the trader quits trading. This is a common story amongst many new entrants.
Introducing Protected Perpetuals by Good Entry, a simplified day trading instrument that allows to break this vicious cycle and replace it with a GOOD trading cycle by ensuring that traders do not lose significantly from their trades. Reference to the table, we see that trading on Good Entry, a trader does not lose significant position then they can keep trading and eventually they will find profits. Stay in the game. Keep trading. We can only create Good positions. Good profits. Good lives.
Disclaimer: Protected Perpetuals are not the same as perpetual contracts as popularized by BitMex. For regular perpetuals, trading is on an order book. The funding mechanism is employed to maintain the contract price in line with the underlying reference asset. Funding payments need to be exchanged between buyers and sellers. Traders trade with reference to the bid price and ask price.
When traders trade Protected Perpetuals, they are essentially purchasing options. The payoff is like above, non linear. The downside is capped and limited to the premiums paid up till settlement. The upside is unlimited as though a trader was trading spot. Profits are realized only when settlement is complete. As downside is capped, more leverage can be added. The maximum allowable leverage is 1000x.
Protected perpetuals is a product that allows traders to take long or short positions without being liquidated from price movements. This means when the market price rises or falls dramatically, traders will not have their positions liquidated by price and neither do they take negative P&L. So should a trader go long, but the market went the other way, their thesis is invalidated cheaply.
To take an example. Trader opened a position at $1,900 activation price for 8 hours. When the market price declined from $1,831 to $1,771. Instead of taking a 3% loss, the trader lost 8 hours 8 * 0.005 = 0.04%. These losses are negligible compared to the actual losses had a stop loss kicked in. Activation price refers to the entry price.
If you lose less when you're wrong, you do not need to trade more to make a comeback. Instead efforts can be made to improve the trader's skill to improve the probability of making successful trades and earn more over time. Therefore, when traders enter and they make money. That is a good entry. When traders enter and they lose their funding rate. It is a good learning opportunity. This is valuable. So this is also seen as a good entry.
Good Entry is pricing options at the money. There is efficiency at the money because they are the closest to the current market price of the underlying asset. Market data is pulled from oracles to ensure that our pricing has consensus with model based pricing.
Good Entry only offers one activation price therefore our pricing does not have major differing opinions on option smile (skew) arising from variations in implied volatility, risk assessment, and market dynamics based on different strikes and maturities.
Traders are not liquidated based on price movements. Instead, positions are closed when there is insufficient margin. When a position is open, traders pay for protection on their positions.
Note, hourly funding rates change over time, which may subject your positions to rebalancing, especially with high-margin usage. Therefore, it's crucial to monitor your margin usage and manage your positions to maintain a safer margin usage percentage.
Traders have no counterparty risk because every position they trade against corresponds to liquidity in the vault. Liquidity providers accept this trade as they are compensated by the trader’s fees.
Good Entry vaults act as a market maker selling options to traders. Each position opened maps to vault liquidity.
Traders refer to the activation price. This is a reference point for the trade entry. Payoff will be determined from here.
Wager is how much capital is at risk at the entry price.
Payout Mulitplier refers to how much leverage the trader would like to take. For now, Good Entry has standardized the amount of leverage traders can take.
Runway: It refers to the amount of time the position can be opened for before its closed. The more leverage a trader takes the shorter the runway will be.
Payoff is linear as spot moves above the activation price for longs. vice versa for shorts.
Traders can open multiple positions subject to open interest.
There are three types of fees that Good Entry takes
There is a minimum 1.5 hour fees collected.
20% of fees collected go to the project treasury
For referral: the trader receives 5% discount from the funding rate. The referred receives 5% of the fees calculated based on premiums received when the positions are closed.
VIP referral status allows for 8% rebate to traders and 8% to referrers.
