Bumper

<p>There are some key differences between Bumper and a Put option. Although both are technically hedging strategies, there is a significant divergence in design, application and functionality.</p><h2 id="header-0">Key Differences between Bumper and a Put Option</h2><ul><li>Price protection</li><li>Settlement</li><li>Premiums</li><li>Renewal</li><li>Participant interaction</li><li>Token bonding</li><li>Yields</li><li>Tokenised primitive<br /></li></ul><h3 id="price-protection">Price protection</h3><p><strong>PUT:</strong> Options are effectively a gamble on the future price, and do not require the buyer to actually own the associated token. There are only ever two outcomes: Either the Option expires ‘<em>in-the-money</em>’, earning a profit, or it expires ‘<em>out-of-the money</em>’, in which case it expires worthless.</p><p><strong>BUMPER:</strong> Bumper protects the value of tokens owned by by the user.</p><h3 id=""></h3><h3 id="settlement">Settlement</h3><p><strong>PUT:</strong> Almost all in-the-money crypto options contracts are cash-settled either at the point of expiry, or when the buyer exercises early (if available).</p><p><strong>BUMPER:</strong> Settlement occurs when a protection takers position is closed, with the form of settlement varying depending on whether the closing price is below or above the floor.</p><p>The table below outlines the different methods of settlement:<br /></p><p><img src="https://miro.medium.com/max/700/1*NVdeOv0RzSYXqLI-atO4aQ.png" /></p><h3 id=""></h3><h3 id="premiums">Premiums</h3><p><strong>PUT:</strong> Premiums are determined by the seller and always paid in full when the contract is opened. On some platforms, premiums may be calculated by the protocol, often using a standard model such as the Black Scholes method.</p><p><strong>BUMPER:</strong> Bumper calculates premiums incrementally when the protocol’s state changes (normally as a result of volatility or change in the balance of locked assets). Premiums are deducted when a position is closed.</p><h3 id=""></h3><h3 id="renewal">Renewal</h3><p><strong>PUT:</strong> Options cannot be renewed</p><p><strong>BUMPER:</strong> Positions can be automatically renewed at any point before the position is closed.</p><h3 id=""></h3><h3 id="participant-interaction">Participant Interaction</h3><p><strong>PUT: </strong>Almost all Options contracts are adversarial between two individual participants, a buyer and a seller.</p><p><strong>BUMPER:</strong> All interactions are between the user and either the protocol’s Asset pool or Capital pool. Users are never matched directly.</p><h3 id=""></h3><h3 id="token-bonding">Token Bonding</h3><p><strong>PUT:</strong> Almost all crypto Options desks do not require users to bond or even hold the protocol’s native token to participate</p><p><strong>BUMPER:</strong> Users opening positions must hold, and bond, BUMP tokens. The specific amount required is determined by the system based on the size (value) of the position being opened.</p><h3 id=""></h3><h3 id="yields">Yields</h3><p><strong>PUT:</strong> Contract sellers earn a yield derived from premiums levied on buyers</p><p><strong>BUMPER:</strong> Liquidity providers earn yield derived from premiums AND automated yield farming.</p><h3 id=""></h3><h3 id="tokenised-primitive">Tokenised Primitive</h3><p><strong>PUT:</strong> Not available</p><p><strong>BUMPER:</strong> When a position is opened and the user deposits their asset into the protocol, a tokenised asset is returned to them which represents their protected asset with the downside volatility removed (due to the protection floor level). This asset, called a Bumpered Asset, is composable.</p><h3 id="learn-more-about-bumper">Learn more about Bumper:</h3><p><a href="https://bumper.fi/" rel="noopener noreferrer nofollow">Bumper website</a>   <a href="https://bumper.fi/resources/flashpaper" rel="noopener noreferrer nofollow">Flashpaper</a>   <a href="https://bumper.fi/resources/litepaper" rel="noopener noreferrer nofollow">Litepaper</a>   <a href="https://discord.gg/YyzRws4Ujd" rel="noopener noreferrer nofollow">Discord   Community</a>   <a href="https://twitter.com/bumperfinance" rel="noopener noreferrer nofollow">Twitter</a></p>

What’s the difference between Bumper and a Put Option?

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Bumper

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