Synthetic Put: Complete Guide
Lockin Your Gains
Last updated
Lockin Your Gains
Last updated
With built-in protection for BTC, ETH, and AVAX tokens, Umoja enables retailers to protect their assets against devaluation risks that will likely wipe out their value.
To participate in Umoja, you need to have a crypto wallet. Additionally, you will need to:
connect your wallet to the Arbitrum Mainnet,
post collateral equivalent to 10% of the notional amount in $USDC. This collateral is required to fund the underlying replicating portfolio,
have a small amount of ETH for gas fees.
If you need $USDC and ETH on the Arbitrum mainnet, you can bridge here.
Your journey begins on the Synths page. Here, you'll find the Synth Widgetâan easy-to-use interface that allows you to place a Synthetic Put or a Synthetic Call, according to your trading strategy. These options are interchangeable and can be tailored to suit your needs.
Visit https://umoja.xyz/synth and follow these steps:
Step 1: Click âSynth Putâ to select this option at the top of the form.
Step 2: Select a token from the list and enter the amount* of token that you want to protect from market loss. (*There is a minimum quantity that you should use to create a Synth: 0.1 BTC, 0.1 ETH and 10 AVAX).
Step 3: Choose a date (maturity date) or the duration you want your protection to last until. The date you select on the calendar is when your market loss coverage will end, or in other words when your Synth will expire (specifically at 11:59:59PM UTC 0 on the date you select).
Step 4: Choose your strike price, meaning the price you want your protection to start at. Take a look at the current price of the token* displayed for your reference. If the price of the token in the market goes even or lower than the strike price you selected, your Synth will be activated. (*Token price is not set by Umoja. The protocol gets this information from reliable and updated sources).
Step 5: After you populate all the fields from the form, this notification will appear: "Collateral should be > 5% of the notional amount you protect to maintain Synth Put". You can click on "Learn more" from there to access additional information on collateral maintenance.
Step 6: You could click on "Details" to see all the details of the Synth you are creating and a breakdown of the Total down payment amount. Click on the "Connect your wallet" or "Place Synth" button to proceed.
This view contains all the details about the Synth you are creating. It breaks down all important information regarding your Synth:
Protected Asset: Indicates the cryptocurrency or token you selected for your Synth Put, its symbol, and trading ticker.
Amount: Indicates the amount of the respective cryptocurrency or token with its trading ticker.
Coverage expiry date: Indicates the date during which the Synth will close. Every Synth on Umoja closes specifically at 11:59:59PM on the date you select.
Coverage strike price: Indicates the price at which you want the Synth Put activated.
Collateral: is the amount of $USDC you have to pay for your Synth and equal to 10% of the value of the hedged asset's current value. For example, if 1 ETH's current price is $3500 and to protect 0.1 ETH is $350 USDC, then 10% of the Collateral will be $35 USDC.
Umoja Fee: Umoja applies a straightforward fee structure for running a Synth on your behalf. The Umoja fee is calculated based on the Synth Put notional amount, the Synth Put expiry, and the strike relative to the current price of the token selected.
Total down payment: the total amount of $USDC you have to pay for your Synth, which includes the collateral amount plus the Umoja fee.
Step 7: A Pop-up window will appear showing all the details of the Synth you are creating. If you need support at this point, you can click on "Get Help" and we will redirect you to our Telegram channel, managed by an Umoja team member. After reviewing the information, click on "Confirm Synth" to pay for this transaction.
Step 8: Follow the instructions given by your wallet extension provider. (Take into account that sometimes, especially if you are using Metamask, the wallet will not open automatically, so please be attentive to the notifications shown on your wallet extension icon). Once your crypto wallet approves the transaction, your Synth is created. At this moment, you will be redirected to the Synth details page in your Dashboard.
Note that your Synth can take up to 15 minutes to place and some of the data will appear after that period.
If you decide not to complete the creation of a Synth flow, Umoja will generate a Draft Synth. This draft will be listed on your dashboard and you will be able to resume its payment when appropriate.
Since the moment you place your Synth, the Umoja protocol takes care of it. Track your Synths from your Dashboard and stay attentive to their performance.
We encourage you to enter their email address on the Account details tab. In that way, Umoja will be able to send notifications only related to your Synths performance.
With Umoja, you can claim your profits without closing your position. If your strategy has gone well, you will be able to withdraw part of your balance.
Check the performance of the Synth from your details page. To withdraw accrued value from your position, you have to do the following: 1. Connect your wallet to the dApp.
2. Navigate to your Synth Put/Call details page and check the âAvailable to Withdrawâ information.
3. Click the "Withdraw" button. and find out the amount that you can withdraw.
4. Select the desired withdrawal amount in USDC.
5. Confirm the transaction. This typically takes around 15 minutes to complete.
Please note that there is a minimum amount to withdraw (1 USDC) and also a maximum amount. Why? Because we make sure you maintain enough balance to maintain your collateral ratio above 10%.
Currently, you can not withdraw more than 100% of the initial collateral that you put in to place your synth.
When you create a Synthetic Option, you are required to post initial collateral equivalent to 10% of the notional of the option. The synthetic option algorithm requires this collateral to fund the portfolio of tokens and perpetuals that replicate the option.
If you have a Call Synth, and the underlying token price goes above the strike, the profits generated by the algorithm will increase the value of your collateral.
Conversely, if you have a Put Synth, and the underlying token price goes below the strike, the profits generated will likewise increase the value of your collateral.
Suppose these so-called âdelta-profitsâ are large enough to keep the value of your collateral above 10% of notional. In that case, your synthetic option is âself-fundingâ, and you wonât need to make any additional collateral top-ups.
However, if your Synthetic Option is not âself-fundingâ, your collateral will gradually reduce over time, driven by the costs of running the algorithm. If collateral drops below 7.5% of notional, we will ask you to top-up the collateral back up to 10%.
Suppose you choose not to do so, and the collateral drops below 5% of notional, rather than auto-liquidating your position, we will cut the notional covered by your Synthetic Option by 50%. By doing so, your collateral will again be equivalent to 10% of notional.
When the collateral ratio of a Synth falls below 7.5%, the Synth´s status will change from "Active" to "Need Top-up". You can verify this on the Synths table in the Dashboard and on the Synths´s Details page.
On the Details page, you can confirm the need to Top-up Synths by consulting the changes to the Collateral ratio, the Notional amount currently covered, and Synth´s balance information. (Read the Dashboard section for more information about how to interpret Detail page items and graphics).
This Details page will show the need for an additional payment in the Payment block. You can click the "Make Payment" button to proceed with your transaction.
If you have previously registered your email in the Profile section of the Dashboard, an automated email will be sent to you recommending making a collateral deposit for the respective Synth.
Click the link embedded in the email to go directly to the respective Synth page and make a top-up payment. Or you can also log into our dApp, navigate to the Dashboard table to allocate Synth, and initiate top-up directly from the Synth details page.
If you have previously registered your email in the Profile section of the Dashboard, an automated email will be sent to inform you about this action. Also, users can navigate to Synth´s details page to confirm changes such as current notional amount, collateral ratio, etc.
it is possible that you do not get to see this notification on time to Top-up your Synth. We recommend you to be attentive to your portfolio.
There are 2 ways to close a Synth on Umoja:
If your Synth reaches the maturity date, the Synth will be automatically closed at the end of that day. (Every Synth on Umoja closes specifically at 11:59:59PM UTC 0 on the date you select).
You can manually close a Synth from the Synth details page anytime before the expiry date is reached. Just open your Synth details page, click the "Close" button, and follow the instructions. You will be asked to pay gas fees at this moment to register your transaction.
Your Synt would be closed and payment would be processed to your wallet within 2 hours. The performance of your synth and the accrued value or balance can change during that time due to market volatility. This action can not be undone.
When the Synthetic Option is closed, due to expiry or cancellation, your collateral is returned to you, plus/minus the P&L made by the synthetic option to that point.
Once a Synth is closed, the protocol will transfer the collateral and any payouts accrued up to that respective time to your wallet in about an hour. The amount transferred will vary depending on the market conditions and Synth position trading performance about the market trend.
If you have previously registered your email in the Profile section of the Dashboard, an automated email will be sent to inform you about this action.
Also, you can confirm that the status of Synth has changed from "Active" to "Close" on the Portfolio Dashboard page and Synth´s details page.
