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What Is Impermanent Loss, and Is It Relevant to Decentralized Options Trading?

It is the temporary loss for LPs when asset prices change, highly relevant in options AMMs where LPs face exercise risk.
Greeks.Live05.11.25

What Is Impermanent Loss, and Is It Relevant to Decentralized Options Trading?

Impermanent loss (IL) is the temporary loss of funds a liquidity provider experiences when the price of their deposited assets changes compared to simply holding them in their wallet. While most commonly associated with standard AMM token pairs, it is highly relevant in options AMMs.

LPs who sell options are exposed to IL when the option is exercised, as they must sell the underlying asset at a loss to the trader, a risk that must be priced into the option premium.

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