September 3, 2021
Dopex Single Staking Option Vaults (SSOV)SSOV
We are proud to formally announce that we will be adding a new feature to the Dopex architecture soon: Single-Staking Option Vaults (SSOV).
Try SSOV on Testnet by following these instructions:
Single staking option vaults will be a catalyst to onboard >500m TVL into Dopex on L2 (Arbitrum) by incentivizing non-$DPX farms with additional yield while utilizing our fair option pricing and white-labeled, easy to use and non-sophisticated UI to onboard more protocols and increase user adoption.
What are SSOVs?
Similar to single staking vaults, SSOVs allow users to lock up tokens for a specified period of time and earn yield on their staked assets. Users will be able to deposit assets into a contract which then sells your deposits as call options to buyers at fixed strikes that they select for end-of-month expiries. SSOV options are either at the money, out of the money, or far out of the money.
How do they work?
- Prior to the beginning of a new epoch, strikes are set for the month-end.
- Users lock assets into this vault and select fixed strikes that you’d like to sell calls at.
- The contract deposits the users' tokens into a single staking pool for farming rewards and also earns a yield from selling covered calls.
In essence, users will be selling covered calls at low risk with no need for intensive knowledge on option Greeks.
Initially supported tokens will be $DPX while earning farming rewards at the same time. Other tokens will be able to utilize SSOV in the future and we will be providing pricing formulas and strikes at the beginning of every month.
Buyers will be able to purchase calls from the vaults using $DPX. On the platform frontend, users will be able to use stablecoins or $ETH for purchases but they will be routed through Sushiswap on Arbitrum and swapped to $DPX.
As it’s European options purchasers will have to wait until expiry to exercise
SSOV depositors will receive yield proportional to how close to ATM strikes are being locked into. Users don’t lose any USD notional value, however, they do have a chance of losing a % of staked assets.
SSOV will appeal to USD denominated traders and will also give incentives for users to raise prices higher.
More buy pressure + less sell pressure + “gm” = numba go up. Simple economics.
ATM (At The Money) options generate the most yield as they have the highest risk of losing upside and the highest theta. Whereas far OTM (out of the money) options get the least
If SSOVs do not get enough usage for a token, close to expiry calls will be so cheap that it will incentivize large buy orders close to expiries.
As a result, buyers will likely attempt to front-run each other by buying calls up beforehand at high premiums. Resulting in more yield generated for depositors.
ATM: An option is ATM when the strike price and market price of the underlying asset are of the same value
OTM: A call option is OTM if the current price of the underlying asset is lower than the strike price
(For more on option moneyness check out this Dopex Essentials Article)
SSOV depositors users will not be at risk of losing any notional USD value by staking their assets.
However, in the case that the token increases rapidly they will lose potential upside. In the case that call buyers are in net profit at the end of the epoch, depositors will lose their staked tokens but will make a profit in USD notional.
Think of it as a take profit at the strike price + premiums collected.
If you have any questions feel free to ask in the Official Dopex Discord Server.
Q: When can depositors unstake?
A: Users can only unstake at the end of the monthly epoch.
Q: What assets can buyers use to purchase the options?
A: $DPX initially but on frontend, users can use ETH or stables which we will route through Sushiswap on Arbitrum.
Q: How is yield calculated?
A: Yield is calculated based on premiums collected vs TVL.
Q: In the event that buyers are in net profit what happens?
A: Depositors will lose their staked tokens but will make a profit in USD notional.
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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