Strategy Payoff
Let’s look into some scenarios to help better understand Volt#05!
Assumptions:
- Epochs are 1 week long
- Alice deposits $1,000 USDC
- Lending rate for USDC is 4% APY
- Half of each week’s lending yield is used to buy SOL put options, hedging against downside volatility
- Tail risk hedge (weekly put options) bought has a strike of $30
- SOL spot price: $40
- If Alice held USDC in her wallet: her investment remains at $1,000
- By depositing into Volt #05: she would earn $0.38 (+0.04%), making her position value $1,000.4!
- If Alice held USDC in her wallet: her investment remains at $1,000
- By depositing into Volt #05: she would earn $0.38 (+0.04%), making her position value $1,000.4!
What this means: the put option is in the money, and the option buyer (a Volt#05 depositor) has the right to sell SOL at $30
- If Alice held USDC in her wallet: her investment remains at $1,000
- By depositing into Volt #05: she would earn $50.4 (+5.04% ), making her position value $1,050.38! Let’s break this down:
- At time of deposit, SOL price was $40 which is equivalent to 25 SOL ($1,000 USDC deposit)
- PnL from Volatility Protection = 25 SOL * ($30 — $28) = $50
- PnL from (Lending Yield — Hedge Cost) = $0.77-$0.38 = $0.38
- Total Volt#05 PnL = $50.4
Last modified 4mo ago