Creating an options index for the everyday user
Stronghold is the aggregation of multiple Thetanuts Basic vaults. These Basic vaults are then combined to form a Stronghold.
Stronghold's position is represented through a minted Index token that represents the pro-rata fair value of the sub-vault, including the premiums that has been generated over time.
Example: USDC stronghold consists of various different basic put selling vaults with different assets, expiration, tenor, APY%, and weights.
On a high level, one of the key problems that Stronghold seeks to solve is circumventing the structural flows by option vaults selling every Friday.
Stronghold addresses the above by selling across the entire term structure, picking spots where other option vaults are not selling. This reduces the probability of over-supply at a certain delta, with a specific tenor, therefore fetching higher yields for our users.
The Index tokens created in Stronghold are bridged to various chains via Wormhole. Thetanuts Protocol supplies liquidity to the various Automated Market Makers (AMMs) for users to swap these positions against the underlying.
Users can refer to which chains the Stronghold tokens are on through the UI. Users can swap in and out of these positions using the Swap button.
The stronghold product is ideal for users who want a more diversified portfolio of assets that are either running covered calls or put selling.
Using a stable coin as collateral, the put-selling stronghold sells puts on a basket of assets with different tenors. The assets chosen and their corresponding weightage are adjusted based on current market conditions, volatility, and beta-adjusted performance by the Thetanuts team.
Using BTC or ETH as collateral (depending on which Stronghold), the vault sells a strip of calls on the underlying. A call strip is defined as multiple call options being sold, with different strikes and tenors.
Through our research, on a risk-adjusted basis, call strips tend to outperform single strike, single tenor calls. The farther tenors allow for mean reversion, while the shorter tenors allow for yield to compound over time faster. Together, it provides a diversified way of selling calls by incorporating various statistical properties.
Example: ETH stronghold consists 2 different ETH basic covered call vaults with different expirations, APY%, and weights.