Options Hedging Calculator

WHAT IT DOES

This tool provides comprehensive options hedging analysis and simulation across leading DeFi options protocols. It reads current asset prices and implied volatility data (simulated in this demo, but would use price oracles and protocol data in production) and applies Black-Scholes pricing to calculate option premiums, hedge effectiveness, and breakeven points. You can analyze call and put options, adjust strike prices, expiration dates, and hedge ratios, then see projected P&L, premium costs, and protection levels. The tool supports protocols including Lyra, Premia, Dopex, and Hegic across multiple EVM chains.

HOW TO USE

Connect your EVM wallet using the "Connect" button, or manually enter any wallet address (optional—address is for context only). Select your underlying asset (ETH, WBTC, USDC, DAI, or LINK). Enter your position size in USD, hedge ratio (0.0 to 1.0), option type (call or put), strike price, days to expiration, implied volatility percentage, and premium budget. Select your preferred protocol and network. Click "Calculate hedge" to run the simulation. The tool will display current price, premium per unit, units purchasable, total premium, notional value, breakeven price, hedge effectiveness, simulated price change, and unhedged vs. hedged P&L. A hedge effectiveness above 50% with affordable premium indicates a viable hedging strategy.

TECHNICAL MECHANISM

The tool uses a simplified Black-Scholes options pricing model to calculate fair option premiums. The formula accounts for current asset price (S), strike price (K), time to expiration (T in years), risk-free rate (r, assumed 5%), and implied volatility (σ). The calculation for calls is: C = S × N(d1) - K × e^(-rT) × N(d2), and for puts: P = K × e^(-rT) × N(-d2) - S × N(-d1), where d1 = (ln(S/K) + (r + 0.5σ²)T) / (σ√T) and d2 = d1 - σ√T. The normal CDF is approximated using the Abramowitz & Stegun method. Units purchasable = premiumBudget / premiumPerUnit. Hedge effectiveness is calculated as 1 - (|hedged P&L| / |unhedged P&L|) with a small epsilon to avoid division by zero. Breakeven price is K ± (totalPremium / units) depending on option type. All calculations are live with user-provided parameters.

WHAT IT CANNOT SEE

The tool cannot view positions on non-EVM chains (e.g., Solana, Bitcoin) or protocols that are not integrated with the tool's data sources. It cannot show real-time options market depth or order book activity—only simulated pricing is available. It cannot access wallet data without explicit user connection or manual address entry. It cannot execute options transactions—this is an analysis and simulation tool only. It cannot guarantee hedge effectiveness due to volatility changes, slippage, liquidity constraints, or market dislocations. The simulation does not account for transaction costs, gas fees, settlement frictions, or margin requirements. The tool's data sources may have rate limits or require API keys for production use. It does not provide financial advice or guarantee the accuracy of aggregated data.

PLEASE NOTE

This tool is for informational and simulation purposes only and is not financial advice. Options involve significant risk including the potential loss of the entire premium. Hedge effectiveness and pricing are estimates based on current parameters and may not reflect real market conditions. Always verify options pricing and liquidity directly on-chain before making any decisions. The tool's data sources are subject to rate limits and availability. This tool only works with EVM-compatible chains and the supported protocols. Use at your own risk.