#termmax @TermMax
Tried mapping the actual downside curve for TermMax's two products instead of just calling one "riskier" in the abstract.
Lending's downside is bounded but not fixed. A borrower on 0.8 MLTV faces liquidation only after LTV breaches LLTV — and even then, the loss caps at 50% of debt per event above $10,000, plus a 10% penalty split between liquidator and reserve. The actual dollar loss depends entirely on how far price moved before liquidation fired.
Options invert that shape completely. Max Cost is fixed the second you enter — the loss is a known number regardless of whether price moves 2% or 200% against you. There's no "how bad did it get" question to ask afterward.
That's the part that reframes "riskier" for me. Lending's downside is unpredictable in size but structurally defended. Options' downside is perfectly predictable but undefended — you already paid the maximum loss upfront, whether the trade goes wrong by a little or a lot.
Put plainly: lending risk punishes you proportionally to how wrong you were. Options risk punishes you the same amount whether you were slightly wrong or catastrophically wrong. That's a genuinely different relationship between mistake-size and cost, not just a bigger or smaller number.
Poll — "Which risk would you rather take?"
$BLESS
$BEAT
$BTW
Tried mapping the actual downside curve for TermMax's two products instead of just calling one "riskier" in the abstract.
Lending's downside is bounded but not fixed. A borrower on 0.8 MLTV faces liquidation only after LTV breaches LLTV — and even then, the loss caps at 50% of debt per event above $10,000, plus a 10% penalty split between liquidator and reserve. The actual dollar loss depends entirely on how far price moved before liquidation fired.
Options invert that shape completely. Max Cost is fixed the second you enter — the loss is a known number regardless of whether price moves 2% or 200% against you. There's no "how bad did it get" question to ask afterward.
That's the part that reframes "riskier" for me. Lending's downside is unpredictable in size but structurally defended. Options' downside is perfectly predictable but undefended — you already paid the maximum loss upfront, whether the trade goes wrong by a little or a lot.
Put plainly: lending risk punishes you proportionally to how wrong you were. Options risk punishes you the same amount whether you were slightly wrong or catastrophically wrong. That's a genuinely different relationship between mistake-size and cost, not just a bigger or smaller number.
Poll — "Which risk would you rather take?"
$BLESS
$BEAT
$BTW
Lending's liquidation risk
80%
Options' premium cost
0%
Neither
20%
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