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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

Scenario 1: SOL price increases to $46 ( ↑ 15%)

  • 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!

Scenario 2: SOL price falls to $34 (↓ 15%), but above the put option strike price ($30)

  • 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!

Scenario 3: SOL price falls to $28 (↓30%) and goes below the put option strike price ($30).

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

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Scenario 1: SOL price increases to $46 ( ↑ 15%)
Scenario 2: SOL price falls to $34 (↓ 15%), but above the put option strike price ($30)
Scenario 3: SOL price falls to $28 (↓30%) and goes below the put option strike price ($30).