Blog
Snipping in DeFi: Tempting, But Not Sustainable
| Research | 23 seen
At Terramatris, we constantly evaluate emerging strategies in the decentralized finance (DeFi) landscape — especially those that promise asymmetric upside. One such tactic is snipping (or sniping), a method that’s gained attention for its high-speed, high-risk approach to token trading.
We want to offer a clear and honest take: while snipping can be entertaining and, in rare cases, wildly profitable, it doesn’t align with our long-term trading philosophy.
What Is Snipping in DeFi?
Snipping refers to the practice of purchasing newly launched tokens at the exact moment liquidity is added to decentralized exchanges (DEXs) like Uniswap or Raydium. Traders — typically using bots — aim to front-run others by getting in before a price surge and exiting moments later with a quick profit.
Snipping usually involves:
- Monitoring new token pair creations.
- Using bots or scripts to submit early, pre-signed transactions.
- Bidding higher gas prices to outpace competitors.
Our Exploration: Interesting, but Not Convincing
To be clear — we have not run any snipping bots ourselves, nor have we deployed capital into active sniping strategies.
However, we’ve explored several publicly available bots, platforms, and tactics. We’ve analyzed codebases, reviewed community feedback, and simulated edge-case scenarios.
Our conclusion?
It’s more fun than it is sustainable.
Snipping appears built for adrenaline, not for stable growth. The field is littered with failed attempts, honeypots, blacklisted contracts, and high gas loss ratios.
It’s difficult to repeat. Impossible to scale. And often too dangerous to justify.
Raydium, Solana & Our Token
Our own Terramatris Token (TERRAM) is live on the Solana blockchain, and available for trading on the Raydium Automated Market Maker (AMM).
Raydium has recently gained significant popularity as the go-to platform for launching new Solana-based tokens — largely because of ultra-low transaction fees and a frictionless developer experience. These advantages have also made Raydium a hotspot for sniping bots, especially during new token launches.
Why We’re Not Betting on It
While we don’t discount the possibility that some early snipers made big returns — especially in the initial DeFi waves — we see too many red flags to consider it a long-term, fund-worthy strategy.
Key Risks We Identified:
- Bot saturation: Millisecond-level races lead to heavy failure rates.
- Anti-bot protections: Contract-level blacklists and honeypots are now common.
- MEV and sandwich attacks: Snipers often become prey to more sophisticated bots.
- Gas loss risk: Even with Solana’s cheap fees, failed transactions can stack up.
- Lack of compounding potential: There’s no reinvestment path or yield growth.
Our Focus at Terramatris
We build the fund around repeatable, risk-adjusted, and scalable strategies.
Our core areas include:
- Directional Trading: Long and short exposure to top crypto assets based on macro signals, trend shifts, and volatility regimes.
- Options-Based Yield:
- Selling cash-secured puts to acquire assets at discounts.
- Writing covered calls to generate income against spot holdings.
- Capital-Efficient Management: Managing margin, risk, and opportunity cost is central to our execution model.
We’re not looking to “get lucky” — we’re here to compound strategically.
Final Word
Snipping in DeFi is flashy. It’s technical. It can be fun. But from our perspective — as traders aiming for consistency, not chaos — it doesn’t pass the sustainability test.
We’re not entirely dismissing it. There may be niche opportunities for those with custom infrastructure, deep code understanding, and fast relayer access. And yes, some early adopters did make it big.
But for us at Terramatris, this isn’t a strategy we stake capital on.
We’d rather play the long game — with options, structure, and discipline.
Selling Covered Calls on Borrowed Bitcoin: Strategic Yield with Asymmetric Risk
| Crypto Options | 23 seen
On May 25, 2025, we executed a position that perfectly illustrates a niche but compelling setup in the crypto derivatives space. We:
- Borrowed 0.01 BTC (worth $1,080 at the time),
- Posted 0.54 ETH as collateral (worth $1,350),
- And sold a cash-settled call option on 0.01 BTC with a strike price of $110,000,
- Collecting a premium of $17 with weekly expiry (May 30).
Let’s break down the rationale, benefits, risks, and variations of this strategy — and why, despite its synthetic nature, it can be a valuable tool in Terramatris' option yield strategies.
The Core Strategy
The basic idea is to monetize a borrowed BTC position by selling a cash-settled call option against it. If BTC stays below the strike at expiry, we pocket the premium. If BTC rises above the strike, we owe the difference in cash, not the actual asset — avoiding delivery risk.
Important nuance: This is not a traditional covered call.
We don’t own the BTC — we’ve borrowed it.
That makes it a synthetic covered call, with an embedded liability to return the BTC.
When This Trade Makes Sense
We like this setup when there's no strong expectation of a significant upside rally, but also no urgency to unwind BTC exposure. Here's why:
- Downside is unaffected: If BTC dumps, we simply repay what we borrowed + interest.
- Upside is capped: We sacrifice potential gains above the strike, but in this scenario, we don’t own BTC anyway, so that upside isn’t truly ours to begin with.
- Premium acts as yield: In flat or mildly bearish markets, we earn incremental yield on BTC exposure we don’t even fund directly.
This structure creates asymmetric optionality: we earn in neutral-to-bearish markets, while having limited pain if BTC rips — provided we manage risk proactively.
When This Trade Can Go Wrong
While selling calls against borrowed BTC can be structurally appealing in range-bound or declining markets, the risk profile changes drastically if BTC rallies hard.
If BTC rises above the strike price (e.g., to $120,000 while our strike is $110,000), the option gets exercised and we owe the difference in cash — $100 in this case. That’s manageable. But:
- We don’t own the BTC — we borrowed it.
- We must return 0.01 BTC, now worth $1,200, not the $1,080 it was at entry.
- Plus, we’re paying interest on the BTC loan during the holding period.
Yes, we can roll the option up and forward, but if the rally is fast or continuous, this becomes expensive and hard to sustain.
Roll-forward: The Tactical Adjustment
If BTC approaches or breaches the strike before expiry, we can roll the call forward:
- Buy back the current option (at a loss)
- Sell a new call at a later expiry — potentially at a higher strike
- Capture more premium and defer obligation
This defers loss realization and potentially recovers it over time — a classic theta farming tactic.
Why It’s Not Truly “Covered”
Let’s be precise: a covered call requires that you own the underlying asset (BTC). In our case:
- We borrow BTC — we don’t control it fully
- The debt remains even after the option expires
- If BTC rallies hard, we face repayment risk at high prices
So while the structure resembles a covered call, it’s closer to a short BTC position with a cash-settled call overlay.
Alternative: Borrowing Stablecoins Instead
One arguably cleaner alternative would be:
- Borrow USDC or USDT against ETH or BTC
- Use that to buy BTC outright
- Sell a true covered call against it
This shifts the exposure from a BTC liability to a stable-coin liability, which:
- Makes P&L easier to track
- Lets us own the BTC
- Still gives us access to yield via covered calls
However, this invites another question:
Why not just use margin accounts from brokers or exchanges?
That’s valid — platforms like Binance or Deribit offer margin functionality that accomplishes similar goals, often with tighter integrations and better liquidity.
The Bigger Picture: Crypto Borrowing and DeFi
The broader insight here is that crypto borrowing is a rich, under-explored domain.
It powers:
- Staking and yield farming
- Liquidity provision in DeFi protocols
- Cross-asset hedging
- Capital-efficient options strategies like ours
As Terramatris continues exploring multi-asset, multi-platform yield generation, crypto collateralized borrowing remains one of the most flexible primitives available.
Final Thought
This approach is worth exploring only when upside explosion seems unlikely and there’s room to roll or unwind gradually. While it might look attractive due to its yield component and downside neutrality, the tail risk in a bullish breakout is real and potentially severe.
We include trades like this in our playbook not because they're “safe,” but because they challenge assumptions, expand strategic thinking, and reflect how crypto’s flexibility can be both a tool and a trap — depending on execution and timing.
How to Sell a Synthetic Covered Call on ETH
| Crypto Options | 50 seen
At TerraMatris Crypto Hedge Fund, we actively deploy a range of options strategies to generate income and manage directional exposure. Today, I want to share an elegant and capital-efficient technique we’re using: the synthetic covered call—a method that replicates the payoff profile of a traditional covered call, without the need to hold the underlying crypto asset.
What Is a Synthetic Covered Call?
Traditionally, a covered call involves owning a crypto asset (like ETH) and selling a call option against it. This generates premium income while capping upside beyond the strike price. But what if you want to benefit from the same structure without committing capital to the spot position?
The solution is to create a synthetic long position using options and then sell a call against it—thus forming a synthetic covered call.
Trade Breakdown: TerraMatris ETH Position (Initiated May 21, 2025)
Here’s how we executed the trade:
- Bought: 1 ATM ETH long call expiring July 25, 2025 — Paid 327 USDT
- Sold: 1 ATM ETH short put with same expiry and strike — Received 253.1 USDT
- Net Debit for Synthetic Long: 327 - 253.1 = 73.9 USDT
This synthetic long position mimics holding 1 ETH. If ETH rises, the value of the long call increases. If ETH drops, we are effectively long through the short put obligation (we’re willing to “buy” ETH at the strike price).
To generate yield, we layered on a short call:
- Sold: 1 weekly ETH call option expiring May 23, 2025, strike 2600 — Collected 31.2 USDT
This short call generates income just like in a traditional covered call. If ETH trades above 2600 by Friday, we’ll roll or adjust the position. If ETH stays below the strike, we keep the premium.
Ongoing Strategy Until July 25
Our plan is to sell a weekly call option every week until the long position expires on July 25, 2025. This rolling strategy aims to capture between 300–400 USDT in total premium over the life of the trade.
Assuming ETH is below 2500 on July 25, we’ll likely get assigned on the short put—effectively buying 1 ETH. At that point, we plan to add a spot ETH long position via perpetual futures, locking in exposure and continuing premium-selling activity.
Break-Even and Risk Profile
The initial synthetic long cost us only 73.9 USDT, while weekly call premiums will potentially offset most of the cost. Factoring in the expected 300–400 USDT in income from short calls, our break-even price on ETH by expiry is projected to be in the $2,100–2,200 range.
- If ETH rallies strongly: Our gains will be capped at the call strike, but the trade is still profitable.
- If ETH drops: We may end up long ETH at an effective cost far below current market prices.
This gives us a high-probability structure to generate yield, manage risk, and opportunistically accumulate ETH.
Conclusion
The synthetic covered call is a powerful tool in our options playbook—especially useful when capital efficiency and yield generation are priorities. It allows us to simulate long exposure and earn premium income without needing to allocate full capital to spot ETH.
At TerraMatris, we continue to explore such strategic derivatives plays to balance income, risk, and long-term crypto accumulation.
Contact
| | 91 seen
Interested to learn more? Or just want to talk, fill out the form to get started
About
| | 3,497 seen
TerraM token
Each TerraM token corresponds to a 1/10,000th share in the fund, allowing investors to gain exposure to a diversified range of assets and strategies. This not only spreads risk but also offers a chance to benefit from the fund's performance.
- Solana blockchain
- Fully Diluted Market cap: $27,400
- Total supply: 10,000
- In circulation: 1,610 (16.1%)
- On Liquidity pool: 342 (3.42%)
- Price per token: $2.74 | Swap on Raydium, ByBit or OKX.com (Solana supported wallet required)