.@sam_battenally is right on the money. Providing liq is like selling a perpetual option straddle.

It is clunky to execute with a trad option bc of the expiration and difference in delta. In GammaSwap, you can hedge the IL by borrowing from the AMM perpetually

Guide below 👇

Interestingly, the solution to this might be AMM DEXs.

The TLDR is market making is challenging because trad markets are closed 75% of the time, whereas crypto is 24/7, so hedging positions isn't possible in off-hours, leading to illiquid markets onchain.

But what if you could hedge an AMM LP position on univ3? A great way to hedge impermanent loss is with options, specifically a long straddle. This is essentially where you bet both sides with two options, but it is interesting that the P&L curve has similarities to an IL curve - and that's how you hedge!

I spun up a little app so you can test this out yourself