What is an Option Vaults?
An easy and unsustainable way to monetize your digital assets no matter which direction the market goes.
The beauty of Option Vaults lies in its simplicity. Option vaults are comparable to limit orders where a trader takes a position to buy or sell a digital asset predetermined price (strike price) and timeframe (maturity date). The unique benefit of option vaults is that the investor also receives interest (yields) which is paid by the option buyer. The interest is determined by the volatility of the underlying asset and maturity date, which is often annualized in APR terms.
The strategies deployed thus far have been vanilla covered call (sell high) and cash-covered put (buy put) strategies which provide the highest base yield available (averagely 15% for lower risk vaults and up to 150% for the higher risk ones). The yield is generated by market makers compete to buy these options from the vaults. They pay the premium for these options upfront and thus provide the high base yield.
Why are Option Vaults a Game-changer?
Simple to Use
To subscribe to option vault, it's as simple as subscribing into locked savings or mutual funds products. You just need to choose the asset type, lock up duration, and the strike price. Voila, you're in. When the vault matures, your principal + yield would automatically be released. Then can choose to re-enter to another vault to capitalize for the next duration.
There are multiple strategies of using Option Vaults, but first you should determine your goal:
- Stable Growth
To grow investment principal slow and steady
- High Yield
To maximize on volatility by accumulating as much yield from option vaults as possible
- Capital Gains
To buy low and sell high
- Stablecoin Accumulator
To accummulate as much USDT/USDC, minimize crypto coin ownership
- Crypto Accumulator
To accumulate as much crypto, minimize stablecoin ownership
Once your investment goal is planned, then it's time to choose your weapon:
- Buy Low = This strategy is suitable for investors who wish to earn yields from their idle fiat or stablecoins, or to buy a desired crypto at a price below the current market price.
- Sell high = This strategy is suitable for investors who wish to earn yields from their idle crypto assets, or to sell their crypto at a higher price in the future.
To know more about the two, check out our Mobee Option Vault here.
High organic yield
Recently many crypto holders realized that their idle crypto assets are not doing anything to work for them, they just sit there. Hence many centralized and decentralized finance players began to offer yield products, particularly in the form of savings and staking -- allowing investors to deposit the funds and earn interest from it. However, it turned out that many of these staking providers are giving away yield inorganically, arguably ponzi in nature -- paying early investors from the new investors money until the flywheel is unsustainable. The biggest failure incident this year is UST which is a stablecoin produced by Terra promising ~20% APR with no lock up and seemingly no risk.
With these unorganic yields revelations, it forces players in the ecosystem to innovate a mechanism where yield can be organic, and investors can still make their assets work for them in a real and sustainable manner.
The way option vaults generate its yield is by selling options contracts to options buyers. Options contracts have a premium, the premium that is generated by the option seller is what powered the yield. The premium price is higher given more time to expiration or greater implied volatility, hence the yield. The option market is very large on the TradFi and are entering digital asset market in a big way, thus the more players and the more volatile the assets, there will always be option traders who wants to capitalize on it. Think of us option vault depositors as the option seller, facilitate these traders to trade options on the open market.
Our team is breathing option vaults in and out and can help to answer any of you inquires before you begin to perform any investment. Do not hesitate to contact our team to learn more.
