> For the complete documentation index, see [llms.txt](https://guide.laevitas.ch/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://guide.laevitas.ch/concepts/squeeth.md). # Squeeth ### What is Squeeth ? Squeeth is a financial derivative for Ethereum, invented by the research team at Opyn. It is the first power perpetual ever and allows traders the exposure to ETH squared. It has a constant positive gamma, which means the payoff curve is always convexe. In terms of earning, when buying squeeth: 1. the more the price of ETH moves in your favor, the more money Squeeth will make you. 2. the more the price of ETH moves against you, the less money Squeeth will cost you. ### How to trade Squeeth: * To buy squeeth, a trader should first buy oSQTH. * To sell squeeth, a trader should deposit ETH as collateral for minting oSQTH. ### Key advantages compared to options : * No strikes, no expiration. * No liquidity fragmentation. * No need to roll position. * Constant gamma. ### Characteristics: It has a distinguishable set of characteristics, that are essential to assess to understand the mechanism and functionning of the contract. * Index price : The price of Ethereum squared. * Mark price : The current trading price of Squeeth. * Funding rate : A payment made by the long squeethers to short squeethers to keep being exposed to squeeth convexity. * In-kind funding : It is how payments are made. Long squeethers own an amount of tokens that we will call oSQTH. Short squeethers are in debt of the same token. Funding is not paid directly, but in a continuous way, meaning that at every second long squeethers lose some of the value of their owning in oSQTH and short squeethers debt decreases by the same amount. It is as if you are selling some of your position to pay funding. * oSQTH : It is the token you use to buy squeeth or mint it to sell it. * Normalization factor : A variable that adjusts the position for both short squeethers and long squeethers. ### Positions Traders can be either long squeeth or short squeeth . In this section we will explain both positions and the consequences of each one of them. #### Short squeeth : Shorting squeeth means selling squeeth. A trader buys oSQTH to mint squeeth, then sell it on a dedicated platform to a buyer. It is a collaterized position, since short squeethers buy oSQTH by putting ETH as a collateral. The ideal market conditions to be short squeeth is when ETH is trading sideways , meaning without high variations in volatility. #### Long squeeth : Longing Squeeth means buying squeeth. A trader buys oSQTH then use it to buy squeeth. It is not a collaterized position, hence can not be liquidated. The ideal market condition to be long squeeth is when the price jumps considerably. It is worth mentioning that holding a long position on squeeth for a long period of time is not efficient, since the funding costs will be too much. ### Returns #### Short squeeth return : * return from $$ETH^2$$ : a short squeether is selling squeeth, so he will endure a squared loss when eth prices increase. * return from daily funding : a short squeether earns a daily funding for taking the position. * return from ETH collateral : a short squeether needs to put ETH as a collateral to take a short position, so he earns a profit when ETH prices increase. The equation of short squeeth return is then : $$ return = -(change : in: eth: price)^2 + funding + collateral :return $$ #### Long squeeth return : * Return from $$ETH^2$$ : a long squeether earns a squared profit when eth prices increase. * Return from daily funding : as a premium for the convexity of longing squeeth, long squeethers will pay a funding to short squeethers. The equation of long squeeth return is then : $$ return = (change : in: eth: price)^2 - funding $$ #### References : For buying and selling squeeth : For more detailed articles about squeeth : * * *