August 8, 2022

The New SSOV V3 Checkpoint System


The New SSOV V3 Checkpoint System

Our flagship V3 Vaults are back with a new checkpoint system that's designed to upgrade our current V3 vaults by allowing Option premiums to be dispersed impartially which translates into a more foreseeable expected return. All the former benefits from depositing in the V3 vaults are still present, but now, with an upgrade that makes the User experience more enjoyable, by having projected returns meet Users expectations. Users can now feel more confident in their strategy estimates which wasn't the case with our previous system as early depositors had more exposure to sold options than later depositors, hence why it slanted forecasted returns.
You can read about how our SSOVs used to function at the footing of our previous V3 article: Dopex Papers: Dopex SSOV V3 (introduction)

How it works

Like the prior system, you can still sell call/put options, deposit at any time, farm with the collateral deposited, etc. What is changing is the premium distribution mechanism.
Dopex now formally uses checkpoints as collateral vaults to store deposited funds.
Every checkpoint can be thought of as an Option Vault with a 2-hour deposit window (this time frame can be subject to change and can vary from vault to vault) which once elapsed is locked until the expiry of the SSOV. The key difference is that every time a Vault locks, a new one is formed, and it does this repeatedly until the expiry of the SSOV.
Once a checkpoint locks, all new deposits within the next 2-hour deposit frame are stored for the next checkpoint. Deposited collateral only gets accounted for when a checkpoint passes, which means deposited collateral is NOT available to buyers until a checkpoint is set.
The collateral value of each Users deposits is stored within the checkpoint's data storage. Once a checkpoint is set, the checkpoint can be used to write Options of its own until the collateral within it gets exhausted.
Whenever Users buy options, the contract loops over all available checkpoints to squeeze out the collateral needed to create the options in a FIFO manner. All premiums are proportionately distributed throughout the checkpoints corresponding with the collateral taken. If needed, Options can be bought over multiple checkpoints to deliver the purchase request.
Collateral is chosen in a FIFO (first in first out) manner, which means earlier checkpoints have priority over later checkpoints when Buyers purchase options but are not a priority within the checkpoints themselves. Within the checkpoints, collateral is chosen in a pro-rata manner which drives it to be fitting for everyone.
At the expiry of the SSOV, premiums and collateral usage is calculated from the checkpoint Users have deposited into, in simpler words, premiums and collateral usage are now always distributed fairly with no unexpected returns.
This may sound more complex than it actually is. That is why in this following section, we will go over an example that should easily clear up everything.


As usual, let’s set the parameters and the situation first.
Eth = 1400$ | 3 Users | $ETH Weekly Call Vault | Strike 1400$
User 1: Deposits 1 Eth on checkpoint 1
User 2: Deposits 2 Eth on checkpoint 2
  1. User 1 deposits 1 $ETH into the weekly vault.
    Since checkpoints are every 2 hours, his deposit stays on standby until the checkpoint is made. (While on hold, the collateral still earns incentives but does not participate in the premiums received from sold options)
  2. Being the only User with liquidity in the vault, all rewards and premiums are 100% directed to him. After the 2-hours pass, his collateral officially becomes available for purchase. Shortly after, User 2 deposits 2 $ETH and goes on standby until the next checkpoint.
  3. A buyer purchases 50% of the available options (1 Eth) which costs him 60$. User 1 now has 50% (0.5 $ETH) of his collateral left and stored 60$ of premiums in the first checkpoint.
  4. After the two hours elapse, the new second checkpoint gets locked and the third one starts its deposit window. The 2 $ETH from User 2 now becomes available for purchase, bringing the total available liquidity to 2.5 $ETH
  5. Again, another buyer purchases 50% of the available collateral (1.25 $ETH) for 130$.
    Since there is still collateral in checkpoint 1, the contract first extracts what it can from it and then moves on to the next checkpoint.
In other words, 0.5 $ETH is taken from User 1’s remaining collateral leaving checkpoint 1 with an outstanding balance of 0 and then fetches the remaining 0.75 $ETH from the second checkpoint.
The premium is then proportionately split and stored between User 1 (52$) and User 2 (78$) inside their corresponding checkpoints.
Day 7 Closing
At the options expiry, the contract computes the amount owed to each User and Buyer by dissecting each checkpoint. Each checkpoint has data on the amount of premium that was collected for that period of time and the weight of each Users collateral relative to the overall deposits within their respective checkpoint.
Example -> $ETH settlement price 1500$
User 1 Premium Earned = (60+52) = 112$
User 2 Premium Earned: (78) = 78$
User 1’s collateral usage = 100% (1 $ETH)
(Strike - Settlement price) 1+ premium = PnL +12$
User 2’s collateral usage = 37.5% (0.75 $ETH) 
(Strike - Settlement price)* 0.75+ premium = PnL +3$
For any other questions, you can always hop onto our Discord and one of our team members or community will gladly attend you further:
About Dopex
Dopex is a decentralized options protocol that aims to maximize liquidity, minimize losses for option writers and maximize gains for option buyers — all in a passive manner.
Dopex uses option pools to allow anyone to earn a yield passively. Offering value to both option sellers and buyers by ensuring fair and optimized option prices across all strike prices and expiries. This is thanks to our own innovative and state-of-the-art option pricing model that replicates volatility smiles.

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