Options trading platforms have found their spot in the DeFi ecosystem. However, the main reason adoption isn’t coming at a faster pace is almost always user experience. Most DeFi options trading platforms are too complicated for newcomers so they don’t give them too much though but Premia Finance seems to have solved this issue.
Trading options on Premia is as simple as it gets and we will go through every step in this guide.
Select Network and Connect Your Wallet #
Premia Finance is available on 3 different networks – Ethereum, Fantom and Arbitrum. Select any of them in your Metamask wallet (and make sure that you have funds in it) and go to the homepage.
Once there you will find a “connect wallet” button in the top right corner of your screen.
After you have connected your wallet, select the “Options” tab on the left side of your screen and start from there.
Purchase a Contract On Premia Finance #
You can start trading by selecting the currency you want to trade. For this example, we will be using WFTM on the Fantom network.
To purchase an option contract, you first need to select if it is a Call or a Put. Everything else including the strike price and duration of the contract can be set manually or by selecting one of the already available options.
In the example below we would be purchasing a 2000 WFTM Put contract that expires on May 24th. Once you enter this information the protocol will calculate the price of your contract automatically based on the current market price and demand.
You can change the duration and strike price by selecting the “custom” option on the screen.
Once satisfied with your contract simply click on “Buy Option” and the protocol will prompt a transaction that you need to confirm. If this is your first time using Premia, you will need to approve spending first and then confirm the purchasing transaction.
Puts are traded with USDC while calls are traded in the currency you are trading. For example, if you are trading WFTM the default payment for the contract will be in WFTM but Premia Finance enables you to choose between different currencies for both puts and calls.
Once everything is set and you have chosen the currency you wish to use as payment, finalize the transaction and the contract will become visible in your portfolio.
Managing Your Contracts #
Select the “Positions” tab and it will show you all of your active positions on the platform. From here you can choose to sell them back to the pool or exercise them if the market conditions are favorable.
If you wish to close your position early simply click on the “close” button and the protocol will give you all of the information regarding the current price of your contract.
Selling your total amount is a default option but if you want to sell a fraction of your position, just choose the “partial amount” option and enter how many tokens you want to sell.
As soon as the transaction is confirmed the proceeds from the sale will be added directly to your wallet.
Providing Liquidity and Staking PREMIA #
Apart from options trading Premia Finance also offers a way to earn passive income by becoming a liquidity provider or staking the native token of the platform called PREMIA.
Liquidity providers should select the “pools” tab on the left and then choose the pool they wish to provide liquidity to.
For an even more simplified way you can use the “smart deposit” option.
Liquidity providers should be aware of the risks included if they chose to fund only one pool so reading the documents before depositing any funds into the pools is highly recommended.
Staking can also be found on the left side of the screen but it is only available on the Ethereum network. To participate in staking purchase some PREMIA tokens on the market and stake them in the staking contract.
Enter how many tokens you wish to stake, approve spending and then approve the staking transaction. Once the tokens are in the staking contract you will return xPremia tokens in return. These represent your underlying position but also generate 80% of protocol fees as passive income for holders.
xPremia tokens can be locked to reduce transaction costs and fees on the platform. The locking process is exactly the same as staking.
Premia Finance really shows how options trading doesn’t have to be complicated, even if it is on the blockchain. Purchasing and selling options has never been easier, especially with a pool that can both purchase and sell options whenever the users want it to.