Introduction

Today (2/22/22) Hegic reached $500,000,000+ in total cumulative options trading volume since the launch of Hegic V8888 on August 10, 2021. Two days ago the protocol celebrated its 2nd birthday as the very first version of Hegic was released on 2/20/20.

There’s no better time to take the next big step in Hegic’s history than now.

I’m happy to introduce Hegic HardCore, a new version of Hegic. A sort of a quantum leap for the protocol. And yes, it is live now.

Hegic is an on-chain peer-to-pool options trading protocol built on Ethereum. With Hegic you can trade 24/7 American, cash-settled, on-chain ETH and WBTC call/put options with no KYC or registration required for trading.

Please note that options trading on Hegic V8888, all operating liquidity pools, and $HEGIC staking contracts will continue to operate as normal.

Hegic Long-Term Pools (HLTPs) participants will have the same shares on the distribution day in August 2022 as per HLTPs Year 1 parameters and terms. The hedged liquidity tranches holders are still hedged and have on-chain guarantees to withdraw the same amount of liquidity deposited into the pools. There is no need to do anything extra, withdraw funds, re-stake or migrate from V8888 to HardCore as both versions will run simultaneously and are available at https://www.hegic.co/.

Hegic HardCore: What’s New

🟢 Out-of-the-Money ETH Call & Put Options
🟢 Out-of-the-Money WBTC Call & Put Options
🟢 Out-of-the-Money Options Rolling Strikes
🟢 One-click Options Strategies: Straddle, Strap, Strip
🟢 Live on Arbitrum L2 Now

🟢 $HEGIC Stake & Cover Pool
🟢 No Migrations for $HEGIC Stakers
🟢 Hegic Operational Treasury
🟢 Monthly Net P&L Settlement
🟢 $HEGIC Token Intrinsic Price

Out-of-the-money (OTM) ETH and WBTC Call & Put Options With Rolling Strikes

You can now trade ETH and WBTC call/put options with out-of-the-money (OTM) strikes on Hegic HardCore. Hegic is offering Rolling Strikes on ETH calls/puts and WBTC calls/puts. Here’s how they work.

There are six OTM strikes available.

Three OTM strikes for call options:
Market Price + 10% (+rounding) = OTM Call Strike #1
Market Price + 20% (+rounding) = OTM Call Strike #2
Market Price + 30% (+rounding) = OTM Call Strike #3

Three OTM strikes for put options:
Market Price - 10% (+rounding) = OTM Put Strike #1
Market Price - 20% (+rounding) = OTM Put Strike #2
Market Price - 30% (+rounding) = OTM Put Strike #3

Example: Let’s say the market price of ETH is $2,337.

The OTM strikes that will be available for trading are:

For call options:
$2,337 * 1.1 = $2,571 +rounding => $2,600 Strike #1
$2,337 * 1.2 = $2,804 +rounding => $2,800 Strike #2
$2,337 * 1.3 = $3,038 +rounding => $3,000 Strike #3

For put options:
$2,337 * 0.9 = $2,103 +rounding => $2,100 Strike #1
$2,337 * 0.8 = $1,869 +rounding => $1,900 Strike #2
$2,337 * 0.7 = $1,636 +rounding => $1,600 Strike #3

The OTM options can only be exercised if the strike price is reached.

Whenever the price of ETH or WBTC changes, the corresponding OTM strikes will follow the market price. The Rolling Prices are about offering a range of -30% — +30% out-of-the-money strikes at any given time.

Thanks to the peer-to-pool model there is no need to wait for market makers or counterparties to buy options on Hegic. Liquidity is already there. Choose call or put, ETH or WBTC, option size, period of holding, and one of the OTM strikes. Click to buy, confirm the transaction and you’re in!

OTM Options Pricing

Hegic HardCore Beta is proudly using the state-of-the-art Black-Scholes-White-Moses-Yeezus-Kardashian formula, invented in 1779 and battle-tested with the help of 300 quants taken hostage and asked to create the most complex options pricing formula so that people don’t ask a lot of questions and just blindly believe in the abracadabra math and the Greek symbols behind it…

Just kidding. The short (and honest) answer is: the options are… just adequately priced to be attractive compared to crypto options prices on centralized exchanges. Options prices automatically change when the market prices change and are adjusted through the IVRate parameter in contracts.

Since any option contract is just an abstraction (not something physical, real), any price is a fair game. There are hundreds of options pricing models, each claiming to be the best. I have yet to come up with a suitable options pricing formula that would fit Hegic’s peer-to-pool options selling model. So while work is in progress, feel free to analyze and compare prices and decide for yourself whether they suit you.

ETH OTM Call Options Real Prices Example

ETH Market Price: ~$2,500
1 ETH call option, 7 days period, 2800 Strike: $58.28
1 ETH call option, 30 days period, 2800 Strike: $175.38
1 ETH call option, 45 days period, 2800 Strike: $256.23

ETH Market Price: ~$2,500
1 ETH call option, 7 days period, 3000 Strike: $27.20
1 ETH call option, 30 days period, 3000 Strike: $120.68
1 ETH call option, 45 days period, 3000 Strike: $206.96

ETH Market Price: ~$2,500
1 ETH call option, 7 days period, 3300 Strike: $10.10
1 ETH call option, 30 days period, 3300 Strike: $62.75
1 ETH call option, 45 days period, 3300 Strike: $108.41

ETH OTM Put Options Real Prices Example

ETH Market Price: ~$2,500
1 ETH put option, 7 days period, 2300 Strike: $77.70
1 ETH put option, 30 days period, 2300 Strike: $185.04
1 ETH put option, 45 days period, 2300 Strike: $246.38

ETH Market Price: ~$2,500
1 ETH put option, 7 days period, 2000 Strike: $27.97
1 ETH put option, 30 days period, 2000 Strike: $91.71
1 ETH put option, 45 days period, 2000 Strike: $149.80

ETH Market Price: ~$2,500
1 ETH put option, 7 days period, 1800 Strike: $17.09
1 ETH put option, 30 days period, 1800 Strike: $62.75
1 ETH put option, 45 days period, 1800 Strike: $ 98.55

WBTC OTM Call Options Real Prices Example

WBTC Market Price: ~$37,000
1 WBTC call option, 7 days period, 41000 Strike: $536
1 WBTC call option, 30 days period, 41000 Strike: $1,850
1 WBTC call option, 45 days period, 41000 Strike: $2,661

WBTC Market Price: ~$37,000
1 WBTC call option, 7 days period, 44000 Strike: $210
1 WBTC call option, 30 days period, 44000 Strike: $1,030
1 WBTC call option, 45 days period, 44000 Strike: $1,853

WBTC Market Price: ~$37,000
1 WBTC call option, 7 days period, 48000 Strike: $84
1 WBTC call option, 30 days period, 48000 Strike: $531
1 WBTC call option, 45 days period, 48000 Strike: $769

WBTC OTM Put Options Real Prices Example

WBTC Market Price: ~$37,000
1 WBTC put option, 7 days period, 33000 Strike: $715
1 WBTC put option, 30 days period, 33000 Strike: $1,850
1 WBTC put option, 45 days period, 33000 Strike: $2,365

WBTC Market Price: ~$37,000
1 WBTC put option, 7 days period, 30000 Strike: $311
1 WBTC put option, 30 days period, 30000 Strike: $1,046
1 WBTC put option, 45 days period, 30000 Strike: $1,675

WBTC Market Price: ~$37,000
1 WBTC put option, 7 days period, 26000 Strike: $132
1 WBTC put option, 30 days period, 26000 Strike: $628
1 WBTC put option, 45 days period, 26000 Strike: $966

One-Click Options Strategies: Straddle, Strap, Strip

Hegic HardCore is entering the uncharted territory of structured options products. Once you are into options trading for at least a few weeks and you make profitable trades on Hegic, you can start using more sophisticated strategies. Start with Straddle, Strip, and Strap.

Instead of manually buying different options when constructing a strategy, calculating individual break-evens and P&L of your positions, you can trade structured options products on Hegic HardCore in one click.

Buying one-click options strategies on Hegic HardCore is like buying a Tesla car: no need to visit dealerships, no fuss, and lousy complications. It’s just delivered straight to you and you are ready to win big!

Straddle = 1x ATM Call + 1x ATM Put

The Straddle is a strategy that helps you to make a bet on a volatility rise: that the price of an asset will soon increase or fall (any direction). The Straddle consists of a call option and a put option with the same strike price and the same expiration.

Instead of being bullish or bearish about the future price, you can have the following reasoning when buying it: “I don’t care what the price will be, but if it changes significantly in either direction during the period of holding the Straddle, I win.”

The Straddle has a limited cost and unlimited potential profit.

Pro tip: Buying the Straddle is cheaper than buying 1x ATM Call + 1x ATM Put independently on Hegic V8888.

Strap = 2x ATM Calls + 1x ATM Put

The Strap is similar to the Straddle in terms of betting on rising volatility. The Strap usually consists of two call options and one put option with the same strike price and the same expiration.

You can think of the Strap as 🐂 a bullish Straddle 🐂: “I don’t care what the price will be, but if it changes significantly in either direction during the period of holding Strap, I win. And I win even more if the increase in volatility leads to an increase in the price of the asset.”

The Strap has a limited cost and unlimited potential profit.

Pro tip: Buying the Strap is cheaper than buying 2x ATM Calls + 1x ATM Put independently on Hegic V8888.

Strip = 1x ATM Call + 2x ATM Puts

The Strip is similar to Straddle and Strap in terms of betting on rising volatility. The Strip usually consists of one call option and two put options with the same strike price and the same expiration.

You can think of the Strip as 🐻 a bearish Straddle 🐻: “I don’t care what the price will be, but if it changes significantly in either direction during the period of holding Strip, I win. And I win even more if the increase in volatility leads to a drop in the price of the asset.”

The Strip has a limited cost and unlimited potential profit.

Pro tip: Buying the Strip is cheaper than buying 1x ATM Call + 2x ATM Puts independently on Hegic V8888.

Straddle, Strap and Strip is just the tip of the iceberg of Hegic options strategies. With these structured options products, you will be able to bet on rising volatility no matter which direction the market is heading.

Soon you will also be able to trade options strategies and profit from low volatility where relatively small price swings over a fixed period can result in profits from specific options strategies. Imagine taking profits when the price is barely moving in any direction and everyone else is just wasting their time and looking at the charts.

With other options strategies, you can also win if the price stays in a certain range for a certain period, with a fixed options strategy cost and no liquidations at all.

You will be able to bet not only on the rise in volatility, as is now possible with Straddle, Strap, and Strip, but also on its calmness, or its rise to a certain level and profit from any imaginable market behavior with a set of one-click structured options products on Hegic.

Live on Arbitrum L2 Now: Start trading OTM Call & Put Options and One-click Options Strategies

Arbitrum is a layer 2 Ethereum scaling solution. You can now use Hegic HardCore on Arbitrum by paying only a fraction of the standard transaction fee (gas fee) compared to the Ethereum mainnet. Transactions are confirmed almost instantly on Arbitrum, so you won’t have to worry about price volatility during the confirmation period.

At the time of this announcement, Arbitrum is the #1 layer 2 scaling solution in terms of total value locked, market share, and adoption. Moreover, a significant number of Hegic users are already familiar with Arbitrum L2 and have repeatedly asked if Hegic will ever be deployed there. Well, it is now.

Arbitrum Token Bridge + Buying Arbitrum USDC

1. Bridge your ETH to Arbitrum: https://bridge.arbitrum.io/. See the Arbitrum Bridge tutorial here: https://arbitrum.io/bridge-tutorial/.
2. You will need Arbitrum USDC for paying premiums when buying OTM options and options strategies. Swap bridged ETH to USDC on Arbitrum Uniswap: https://app.uniswap.org/#/swap?chain=arbitrum
3. You will also need to have some ETH to pay for transactions on Arbitrum (A LOT CHEAPER than trading in mainnet). Make sure you have enough Arbitrum USDC to pay for options/strategies premiums and Arbitrum ETH to pay for your transactions of buying and exercising contracts.
4. Start trading OTM options and one-click strategies on Hegic HardCore: https://www.hegic.co/ → Connect Wallet → Arbitrum Network.

Hegic Stake & Cover Pool

Hegic HardCore introduces a new liquidity aggregation and utilization model to drastically improve capital efficiency and scale of the options trading volumes with no massive capital requirements.

There is no division into liquidity providers and stakers / premiums and settlement fees on Hegic HardCore. Instead of many different liquidity pools and staking contracts, there is only one Hegic Stake & Cover pool. Staked $HEGIC tokens are utilized to cover the protocol’s net losses on selling options/strategies and earn net profits on all expired options/strategies.

The Hegic Stake & Cover (S&C) Pool participants receive 100% of net premiums earned on selling OTM options (both ETH and WBTC calls & puts) and options strategies (all of them) on Hegic HardCore. The net premiums earned (or losses accrued) are distributed pro-rata among all of the Hegic S&C Pool participants.

The net premium is a difference between the total premiums received from all options/strategies buyers and the total profits paid out to options/strategies holders who exercised their contracts in-the-money.

The Hegic S&C Pool participants receive the net P&L in Arbitrum USDC tokens and can claim them once the active options/strategies expire out-of-the-money and the premiums are unlocked, thus, becoming claimable.

The net P&L settlement is conducted monthly: the net difference in Arbitrum USDC tokens between the monthly total premiums received and the total profit earned by options/strategies buyers is sent to the Hegic Stake & Cover Pool from the Hegic Operational Treasury.

If the Hegic Stake & Cover Pool has a monthly negative P&L, a share of the total $HEGIC tokens staked will be sold to cover the net USD difference. The covered loss will be shared pro-rata among the Hegic S&C Pool participants.

Only Hegic V8888 staking participants who staked $HEGIC tokens before 2/22/22 are eligible to receive a share of the Hegic Stake & Cover Pool’s P&L in USDC. No migrations or re-staking of $HEGIC tokens are required. Both staking lots and microlots holders are eligible to receive a share of net P&L in Arbitrum USDC tokens generated by Hegic HardCore.

At launch, Hegic V8888 stakers won’t be participating in covering potential losses on selling options/strategies on Hegic HardCore. Instead, they will receive synthetic hHEGIC tokens that will be used as a proxy for participating in the Hegic Stake & Cover Pool.

When after a monthly settlement net profits will be accumulated on the Hegic Stake & Cover pool, hHEGIC holders will be able to claim pro-rata Arbitrum USDC tokens. If after a monthly settlement net losses will accrue, a pro-rata share of hHEGIC tokens will be collected to cover the monthly loss.

hHEGIC tokens will be distributed among the Hegic V8888 stakers in the next 2 to 10 days after this announcement publication.

Attention: hHEGIC tokens are not minted yet. Beware of scams. Follow Hegic on Twitter to be among the first to know about the hHEGIC tokens mint and free distribution: https://twitter.com/HegicOptions.

There are two potential outcomes for the Hegic V8888 staking participants who will be participating in Hegic HardCore: losing a share of hHEGIC (synthetic tokens, not their $HEGIC staked on V8888) or earning Arbitrum USDC tokens (real, claimable tokens).

All risks associated with options/strategies selling efficiency and potential losses during the Hegic HardCore beta testing phase will be borne by the Hegic Development Fund. The initial liquidity for selling options and strategies will also be deposited by HDF as the only options/strategies seller during the Hegic Hardcore beta testing phase.

Hegic Operational Treasury

Hegic Operational Treasury (HOT) is used for collateralizing active options/strategies, accumulating premiums paid by buyers, and conducting intramonthly settlement of ITM options/strategies by sending the net P&L to the option/strategy holder when exercised.

The initial liquidity for selling options and strategies will be deposited by the Hegic Development Fund. During the Hegic Hardcore beta testing phase, HDF will be the only options/strategies seller to safely test the new version’s functionality and economics. No other parties will be able to deposit USDC for writing OTM options and options strategies during the beta testing phase.

The total net profits in USDC generated on selling OTM options and options strategies and accumulated in the Hegic Operational Treasury are settled monthly and sent to the Hegic Stake & Cover Pool.

HEGIC Token Intrinsic Price

The initial intrinsic price of $HEGIC is set at the launch of Hegic Hardcore by depositing the corresponding amounts of hHEGIC tokens (a synthetic $HEGIC token used for setting the shares of Hegic V8888 stakers in Hegic HardCore) and Arbitrum USDC tokens into the Hegic Stake & Cover pool.

Initial hHEGIC Intrinsic Price = USDC TVL / Total hHEGIC

If Hegic HardCore will be generating net profits on selling options and strategies, then USDC will be accumulating on the Hegic Stake & Cover Pool. Thus, the intrinsic price will be growing (more USDC, same hHEGIC).

With net profits earned by the protocol and the rising intrinsic price of hHEGIC, accumulated USDC will be claimable by the hHEGIC holders. To claim USDC from Hegic HardCore, a corresponding amount of hHEGIC should be sent to have the ratio of USDC/hHEGIC stay the same (claiming USDC and sending hHEGIC from the Hegic Stake & Cover Pool).

If Hegic HardCore will be suffering losses on selling options and strategies with more positions exercised in-the-money by the buyers, then the amount of USDC on the Hegic Stake & Cover Pool will be declining. Thus, the intrinsic price will be decreasing (less USDC, same hHEGIC).

The goal behind implementing a new model that is focused on the intrinsic price of $HEGIC is to directly link the fundamental growth of the protocol to the token price. The growing volumes, raising popularity of options trading on Hegic, new products and strategies, thousands of new users, and tens of thousands of new options traded would be directly impacting the intrinsic price of $HEGIC on the Hegic Stake & Cover Pool.

PeckShield Security Audit

The Hegic HardCore Beta contracts were audited by PeckShield. The security audit report will be published in the next 2 days after this announcement publication. Follow Hegic on Twitter to be among the first to read the security audit report: https://twitter.com/HegicOptions.

Please note that no security audit can guarantee that contracts are completely safe to use and can’t be exploited by malicious actors. Only use Hegic Hardcore Beta with money that you can 100% afford to lose.

You won’t be compensated in case of any losses related to the Hegic protocol. If you do not agree with this never use the Hegic protocol / Hegic HardCore Beta.

The Hegic HardCore Beta codebase will be open sourced in the next 2 days after this announcement publication. You will be able to inspect the Hegic Hardcore Beta open source code by yourself on the Hegic GitHub page: https://github.com/hegic.

One more thing…

$HEGIC token-economics have been introduced in August 2020. The liquidity mining & utilization rewards, staking, bonding curve, AMM pools bootstrapping, and other parts of the protocol’s token-economics structure have been introduced. But the protocol moves fast, and today’s Hegic is far from what it was 1.5 years ago.

To have a long-term commitment to focusing on Hegic’s cash flows and $HEGIC tokens intrinsic price, as many tokens as possible should be in circulation instead of sitting idle on the addresses. The $HEGIC total supply should be as close as possible to the $HEGIC circulating supply.

1.93B of 3B $HEGIC tokens, 2/3 of $HEGIC supply, have been burnt: https://etherscan.io/token/0x584bC13c7D411c00c01A62e8019472dE68768430?a=0xdead000000000000000042069420694206942069

Total Supply before: 3,012,009,888 $HEGIC
Total Supply now: 977,684,725 $HEGIC (-68%)

Circulating Supply / Total Supply before: 23.36%
Circulating Supply / Total Supply now: 71.98%

Right now almost all $HEGIC tokens are in circulation, in the hands of token holders. The two exceptions are 190.59M of $HEGIC reserved for an upcoming rHEGIC2-HEGIC Phase II liquidity mining & utilization rewards conversions (see rHEGIC2 token contract) and 183.36M of $HEGIC in the Hegic Development Fund (with 2.5 more years of lock-up left; unlocked linearly on a per-block basis, claimable manually).

Zero $HEGIC tokens have been sold on the open market by the Hegic Development Fund since the $HEGIC token launch 1.5 years ago.

190.59M rHEGIC2 will be converted into 190.59M $HEGIC throughout 2022. Phase II tokens will be unlocked after the cumulative on-chain trading volume on Hegic during the Phase II exceeds $1B or on 11/11/2022.

As per 2/22/22, ~$173M in total trading volume is left till the Phase II unlock ceremony starts.

The Phase II rewards unlock ceremony will take 9 months. During this period Phase II rewards will be unlocked weekly (2.77% of Phase II rewards per week) and token holders will be able to claim them with 100% of Phase II rewards distributed at the end of the ceremony.

Join Hegic Discord → 🌁#hardcore-beta and feel free to share your feedback or ask any questions about the Hegic Hardcore Beta.

I’m pretty sure that you’ll enjoy playing with Hegic HardCore.

Have fun,

Molly Wintermute
2/22/22

Attention: Live in Beta

DISCLAIMER: Hegic HardCore is an experimental open source protocol in beta built on Ethereum. Use it at your own risk. If you will lose any money using Hegic HardCore, you won’t be compensated or refunded. Only use Hegic HardCore with money that you can 100% afford to lose. You can lose 100% of your funds provided to the Hegic liquidity pools. Hacks, security bugs and economic abuses can happen because of an experimental nature of beta version of the protocol. You won’t be compensated in case of any losses related to the Hegic protocol. If you do not agree with any part of this disclaimer never use the Hegic protocol / Hegic HardCore Beta.

ACQUIRING/HOLDING/OWNING/USING HEGIC TOKENS DOES NOT PROVIDE/GUARANTEE YOU OR ANYBODY ELSE DIVIDENDS OR ANY KIND OF RETURNS. ACQUIRING HEGIC TOKENS DOES NOT PROVIDE YOU WITH ANY RIGHTS IN ANY JURISDICTION. HEGIC TOKEN IS NOT A CURRENCY BUT AN INTERNET DIGITAL UNIT OF NON-FINANCIAL UTILITY THAT CAN BE USED SOLELY IN THE HEGIC PROTOCOL. THE HEGIC PROTOCOL SHALL NOT BE LIABLE TO YOU OR ANYBODY ELSE FOR ANY DAMAGE OR(AND) LOSSES IN ANY CONNECTIONS WITH HEGIC TOKENS. IF YOU DO NOT AGREE WITH ANY PART OF THIS DISCLAIMER NEVER ACQUIRE/HOLD/OWN/USE HEGIC.