From a trading psychology perspective, taking a position on Bumper fundamentally changes the way to look capitalise on price movement in crypto markets. Trading with a protected price floor unlocks new trading strategies and allows traders to beat the market, whichever way it moves.
Bumper is a DeFi hedging tool which provides price protection and trading opportunities from downside volatility. Although Bumper shares some similarities with Stop Losses, Options Desk and insurance policies, it offers the trader new functionality and is radically different under the hood.
When introducing radically new functionality & trading strategies to the market which help traders successfully and consistently beat the market, we also need to address new ways to look at Trade PnL since a traditional Long/Short are directional trades, whereas, a Bumper Hedge position is bi-directional.
In the case of Bumper, traders generate PnL in three specific ways as we explore below:
When Price Goes Up
When in a Hedge position, traders benefit from a protected floor to the downside whilst simultaneously realising gains to the upside. During the term of your position, Positive PnL is attributed to the rise in price of your traded asset, minus any premiums and fees.
Definition:
(Asset Market Price x Quantity of Asset at Position Close) minus (Asset Market Price x Quantity of Asset at Position Open) minus (Bumper Premium — Bumper Protocol Fee).
When Price Goes Down
When in a Hedge position and prices go down, traders benefit from a protected price floor to the downside which allows them to maintain the value of their position as price dips below the floor — the more price drops, the more you have beaten the market. During the term of your position, Hedge PnL is attributed to the delta between your protected floor price & any premiums/fees, and the actual market price when you claim USDT at your protected price.
Definition:
(Hedge Protected Floor Price x Quantity of Asset at Position Open) minus (Bumper Premium — Bumper Protocol Fee) minus (Actual Asset Market Value x Quantity of Asset at Position Claim)
Making Yield
When in an Earn position, traders are paid dynamic yields which are optimised by the protocol based on market conditions and premiums paid on hedged positions. During the term of your position, Earn PnL is simply attributed to the total yield paid throughout the period of the term.
Definition:
(Earn position value at Close) minus (Earn position value at Open) minus (any protocol fees)
Risks & Negative PnL
Of course trading comes with a element of risk which is impossible to negate entirely. In a hedge position, there is a shallow window of negative PnL traders will experience if market price at the end of term falls above floor but lower than premium cost and below floor but above the combined cost of premium and floor price. In this scenario traders can close the position and take a small loss or renew the position if a larger market movement in either direction is expected.
In an Earn position in certain conditions there is a risk of negative yield and/or possible liquidation.
Beat the Market
Bumper unlocks new strategies which allow traders to always beat the market, regardless of where we are in a market cycle and regardless of the direction the market moves.
- In a bull market, downside Hedge PnL allows traders to re-buy and accumulate more of their traded asset which will later appreciate in price during Positive PnL positions with subsequent upwards swings.
- In a sideways market, traders benefit from Positive PnL opportunities in any market upward swings up and smaller accumulation opportunities for Hedge PnL.
- In a bear market, Bumper provides traders with a highly efficient capital preservation strategy and a significant Hedge PnL whendownside volatility plays out, returning them stablecoins at their protected value to re-enter the market when the time feels right.
Bumper, a revolutionary DeFi hedging tool, transforms trading psychology by providing a protected price floor and unlocking new strategies for consistent market-beating performance. Whether in a bull, bear, or sideways market, Bumper empowers traders to capitalize on price movements, ensuring downside protection and yielding profits, urging you to explore this innovative tool and redefine your trading success.
Make your first trade with Bumper, incentives are waiting!
Originally published at https://www.bumper.fi.
