Trading Fees

Fees for opening and holding a perpetual option

Origination Fees

GammaSwap charges an origination fee to borrowers that is charged only when the position is initialized. The origination fee starts at 0%-0.1% of the total notional liquidity borrowed depending on the AMM. To calculate the notional liquidity borrowed, use the following formula:

total liquidity borrowed = (1 / 1 - LTV) * initial deposit

To calculate the origination fee, we simply multiply the total liquidity borrowed by the opening fee rate:

origination fee = total liquidity borrowed * opening fee rate

Let's say we opened a position with 95% LTV and deposited 10,000 USDC. The origination fee that would be charged is

$f(x) = ((1 /1 - .95) * 10000) * 0.001$

$f(x) = 200000 * 0.001$

$f(x) = 200$, therefore the origination would be 200 USDC

Please be aware that the origination fee in the GammaSwap dApp may differ from the one calculated here. Always confirm fees in the confirmation modal.

If you open a straddle position, there are no additional rebalancing fees. If you open a long position or short position, the total notional collateral is rebalanced towards one of the tokens by executing a swap transaction, so it will incur additional rebalancing fees from 0% to 0.08% depending on the CFMM. It is reflected in the trade position as price impact and can be controlled using the slippage parameter.

Dynamic Origination Fees

After 80% utilization of the Liquidity Pool, the GammaSwap contract will start charging exponentially increasing opening fees to disincentivize over leveraging of the platform and prevent attacks to the protocol. When the pool is close to 100% utilization, origination fees approach 100% to prevent locking of the pool.

Rebalancing Fees

Rebalancing fees are dynamic and will vary between 5 and 50bps depending on the extent of the rebalancing. They are only charges on long and short positions.

In addition to protecting the protocol and preventing excessive volatility, the rebalancing fees also serve to replicate the volatility smile found in options as straddles do not incurr any slippage or rebalancing costs.

Fee Distribution

1. Borrow (funding) Fees: 10% protocol, 90% liquidity providers

2. Rebalancing Fees: 60% liquidity providers, 40% protocol

3. Orgination Fees: 60% liquidity providers, 40% protocol