Introduction to POVs

To say options are a massive market in TradFi would be an understatement. Options play a significant role in TradFi and are not only used by market makers, and hedge funds, but also by retail traders. Today, crypto futures and options make up roughly 57% of the total monthly volume. While this volume is healthy in aggregate, the maturity of the market can be gauged by the relative distribution of volume across instruments and venues. Crypto options volume as a percentage of the spot is only around 2%, while the options volume for the US equity market is around 35X times the spot market.
Options can seem complex, as strategies can involve multiple strikes, expiries, and several other factors that an investor needs to consider. Add to that the gas fees associated with frequently rolling options can significantly eat into the yields generated. DOVs allow users to bypass the hassle of options strategies and only have to simply stake their assets in vaults.
Standing true to the nature of DOVs, Polysynth’s Option Vaults (POV) make it easier for investors to make the most out of options in perpetuity. Our option vaults abstract away all of the complexities of underwriting options, pricing options, juggling strike prices, and replacing it all with a simple deposit and auto-compounding earning vault.
The premium collected from selling options represents the yield and is distributed among users in proportion to their deposits. A user only needs to pay network gas fees only at the time of deposit or withdrawal, and Polysynth takes care of all the operational gas fees thereafter. Even the deposit and withdrawal gas fee is inexpensive, as we are powered by Polygon.
Unique Benefits of POV
Some of the salient benefits of POV:
1.A wider range of structured products: Polysynth offers a much wider and all-encompassing suite of structured products to earn across all market conditions. Unlike other protocols which expand offerings across asset classes, we are focusing on expanding in terms of strategies. Expanding offerings in terms of asset classes somewhat defeats the purpose of options, as all crypto assets are highly correlated. On Polysynth in addition to a wider range of products, there will also be different versions of strategies with varying risk-return payoffs based on an investor's risk appetite. For example, we back-tested our Covered Call strategy on ETH with the last one-year price data to see that the strategy yielded 35.89% APY with the strike price at Delta 0.1 and yielded 73.69% APY with the strike price at Delta 0.3. The low-risk, medium-return strategy with Delta at 0.1 is live, meanwhile, the medium-risk, high-return strategy with Delta at 0.3 will be unveiled soon.
2.Tool for DAOs to earn on their treasury: Projects and DAOs now sit on hundreds of millions of dollars worth of assets with limited and low-yielding avenues for deployment. Depositing assets into LP Pools makes the treasury susceptible to impermanence loss, while lending protocols offer minuscule yields. Polysynth Option Vaults can serve as the ideal venue for treasuries to deploy their treasury assets. Since treasuries hold blue-chip assets such as BTC & ETH from a long-term perspective, they can utilize covered calls to maximise yields, and even if the covered call expires in the money, they would still be up significantly in dollar terms. Treasuries can also use cash-covered puts using stablecoins such as USDC to generate additional yield and even if the options expire in the money, they will be able to accumulate BTC and ETH cheaply.
3.DOV Rewards: We are working towards giving investors POL Tokens equivalent to the fees paid. As such, the net fees will become zero, subsidised with POL Tokens.
FAQs
What are structured products?
Structured products are packaged financial instruments that use a combination of derivatives to achieve some specific risk-return objective, such as betting on volatility, enhancing yields or principal protection.
What kind of structured products does Polysynth have?
We currently offer structured products on BTC and ETH which generate high yield through automated covered call and put strategies. For more information on the strategies, please delve into the product cards for a detailed breakdown.
What is the risk of the covered-call strategy?
The primary risk of running a covered-call strategy is that depositors could give up upside in exchange for guaranteed yield. By selling a call option users are essentially promising to sell the underlying asset at the strike price even if the spot price at expiry is higher than the strike price. This can potentially result in a negative yield on the underlying asset. Please note that although a negative yield is uncommon, depositors will still be tremendously up in dollar terms as the underlying asset would have appreciated significantly in a short period of time.
What is the risk of the cash-covered put strategy?
The primary risk for running a cash-covered put strategy is that the vault may incur a loss if the difference between the strike price and the underlying price at expiry is greater than the premium collected.
Selling cash-covered puts serves as a great strategy to accumulate assets cheaply.
How do I process a withdrawal?
We offer two types of withdrawals:
Instant: Only applicable to funds that are yet to be actively used in the vault. You can withdraw it anytime until 12 PM UTC Friday.
Standard: It's a two-step withdrawal process which you can initiate at any point in time. You can submit a withdrawal request and the funds will become available for withdrawal at 1 PM UTC on Friday.
Are standard withdrawals subject to profit or loss of the week?
Yes, since you are initiating a withdrawal for vault shares, those shares are subject to either the profits or losses of that week which will adjust the final withdrawable amount.
How can I find out the next strike in advance?
There is no way to know the strike in advance, as it's calculated using last-minute data feeds.
Are the management and performance fees included in the expected APY?
Yes.
Where can I see the historical performance?
Every strategy has a card with the vault's graphical representation of historical performance.
What asset are the vault yields paid in?
Yields on every strategy are paid in the same asset you deposit. For example, in the covered calls where you deposit BTC or ETH, the yields are also paid in BTC or ETH respectively, and in the case of covered puts where you deposit USDC or amUSDC, the yields are paid in USDC and amUSDC respectively.
My options are expiring ITM, do I need to do something to exercise?
There is no further action needed on your end. Our strategies self exercise when needed.
What if I don’t withdraw at the end of the cycle?
Your deposit plus the yield earned will be rolled over into the next cycle automatically and earn auto-compounding returns.
Help! I am having trouble using the app.
Reach out to us on Discord, we'll help you out.

What is Polysynth?

Next - Option Vaults

Options Strategies

Last modified 11d ago

Copy link

Contents

Unique Benefits of POV

FAQs