How to break free of NMR price risk

Numeraire
22

That is 0.25, but an active model is typically exposed to 4 rounds simultaneously, which means the maximum burn is 100% of the stake

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23

I meant only for one round. Having 25% of your stake burned because you bail out early should be harsh enough… For 4 rounds compound burning that would be around 68% burned not 100%, by the way.
Edit: I always forget that the payouts are applied 4 weeks afterwards… I was not even aware of the theoretical possibility that you can lose your entire stake if you have 4 unlucky rounds.

24

We really just need a consistent market maker that will be or find the counter parties to 4-week long NMR forward contracts for each round. Perhaps speculators who are willing to buy and hold for 4 weeks would be interested to long the contract. But the nicheness of NMR is maybe not interesting enough for someone to set up this mechanism in large volume with decent liquidity. I think I saw APR of over 100% on some of the NMR swaps on the Sushi/Kashi page. I also don’t understand all this enough to feel comfortable engaging in such a platform where I need to use my head a bit. Would always feel I am missing something.

25

I think its more dangerous than holding nmr. The price of NMR is so damn spiky. You can get liquidated in no time. What is worse you can get liquidated on both sides in one day. IMO it is not worth the risk.

In order to make it work, one must have some money as backup for liquidation calls, that means less money staked, which is less earned, and you can always lose everything.

And the liquidity of the gains is another issue, plus gass fees.

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26

Going short yeah, but I think a forward contract managed by a market maker wouldn’t need that liquidation provision for counter-party risk (I am not sure though?). I was thinking like upon the delivery of the NMR, the agreed upon price could easily be paid by the receiver of the NMR no matter the prevailing market price.

There is a bit of risk if the NMR round performance doesn’t line up with the expected NMR amount in the contract however. Perhaps can allow the quantity to be variable +/- 10% of some stated amount.

So like buy 100 NMR at $10/coin for $1000 at available spot price. Use that 100 NMR to stake 1 model for 4 weeks (liquidate the model after the round). At the same time, enter into a forward contract with some counterparty at the available forward price, let’s say $9.8/coin. Wait 4 weeks to get NMR distribution of 120 NMR let’s say (20% return). Sell 110 NMR at the contract forward price of $9.8 and the other 10 NMR at the prevailing spot price at the time. Do this with a different model slot for each of the 4 weeks.

27

sorry, I forgot to reference the post I was writing about. My reaction is on the idea of staking on borrowed nmr, and or shorting nmr.

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