DeFi Options Vault (DOV)

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#GM! 1/ DOV or DeFi options vault is one of the products in the options derivative market that change how the yield is perceived. #DeFi #Crypto #Cryptocurrency #Bitcoin #Ethereum #ETH #BTC #AVAX #BNB #SOL #visualguide #infographics #Options #Optionstrading #Derivative #DOV

2/ DOV is simply a staking vault—the main difference from the usual DeFi staking vault is that the funds are used to get into a specific options strategy. As such, your return from the DOV will come from mainly options #premium paid in cash / #stablecoins.

3/ DOV only uses two strategies, covered #call and sell #put. These two strategies are considered the simplest and it is closest to synthetic limit #buy and #sell like we normally do in #exchanges.

4/ There are three elements of strategy in DOV: - Tenor - #Strike price - Premium, regarded as the 'real' #yield for DeFi protocol

5/ Covered Call simulates limit #sell scenario at the exchange. To utilize the strategy, the #writer of the option must have underlying tokens. DOV participant/ investor acted as an options writer.

6/ Selling covered call requires you to also own the asset. In this case, your downside is limited as the asset got sold at the strike price if the price falls under the strike price. However, if the asset price keeps climbing, you will realize an opportunity loss.

7/ Selling put options, on the other hand, is simply a synthetic limit buy order at exchanges. To get into this position, you need to have cash / stablecoins ready instead of a #token.

8/ Selling covered put requires you to have #cash ready to purchase the asset when the strike price is triggered. In which case, your downside is unlimited, as when your asset purchase is triggered and you end up with an asset, the asset price could continue to go down.

9/ The #DOV exists to let #investors delegate this task to the DOV who would then execute it on the investors’ behalf. DOVs typically disclose to you which #options #strategy they are pursuing.