In Part One I discussed what structured products are, why people use them, and why due to composability DeFi is the natural breeding ground for new structured products. A large subclass of structured products involve options as part of the strategy, and we want to make it easy for developers to explore and iterate on them! We call these strategies Meta Vaults.
The idea is simple: build on top of the base covered call and put selling vaults and get a cut of the management and performance fees of the base vaults. We have developed a template to get the boring stuff out of the way!
Delta Vault - like a covered call or put selling vault, but takes the opposite side of the trade. The vault allocates a % of the portfolio to invest in the OTM call / put options of the selling vaults or potentially even buy from Hegic. We will roll this out soon.
Example Vaults
- Short strangle strategy, which simultaneously deposits your funds into the covered call vault and put selling vault.
- Long strangle strategy, which is a short strangle but buys the options instead of selling by depositing into the call and put delta vaults. This can be useful if you are just long directional vol or if you are an LP on an AMM (de facto short vol) and want to hedge against large movements.
- Pseudo knock-in / knock-out options vault, which deposits into the corresponding delta vault.
- Use yields from delta neutral basis trading on lemma.finance to buy call options on delta vault, directly bid on gnosis, or buy ATM call options on Hegic!
- Auto-purchase options from yield farming (lending or LM), using delta vaults to gain market exposure.
- Buy ZCB on 88mph and use the rest of the funds to deposit into the delta vaults (flavor of Principal protected notes where instead of ATM call option you buy OTM call option). Alternatively you can use Hegic for ATM call options!
A more comprehensive list can be found in this nice thread by Vadym.
Of course, options don’t have to be part of a structured product strategy, so feel free to repurpose it for whatever you like.
Some might ask: why not develop these Meta Vaults in-house? Two reasons:
- The idea is for any big brain to come in and permissionless-ly spin up a vault. A rich, comprehensive product offering built on the base vaults is now possible.
- We are dedicating all our efforts to building Ribbon V3!
Conclusion
We want any dev to be able to develop a Ribbon Meta Vault within one day by leveraging our new library. In the meantime, join our Discord if you have any questions!
