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How Do Options Contracts Offer a Potential Hedge against Impermanent Loss?

An LP provider can buy a put option on the more volatile asset in their pool. If the asset's price drops significantly, the put option gains value, offsetting the impermanent loss incurred in the liquidity pool.

This strategy allows the provider to protect their downside while still earning trading fees from the pool.

Beyond Trading Fees, What Other Incentives Might a DeFi Protocol Offer to Mitigate Impermanent Loss?
How Can a Put Option Be Used as a Form of Portfolio Insurance?
What Is the Difference between Buying a Put Option and Selling a Call Option in a Bearish Strategy?
How Can a Protective Put Option Be Used to Hedge against This Maximum Loss?