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Covered Call Mode

Parameter

  1. 1.
    Initial ETH spot price = $1,200
  2. 2.
    The user deposits 5 ETH into the covered call-selling wheel vault at the start of the epoch
  3. 3.
    The strike price of the covered call option = $1,500
  4. 4.
    Yield per epoch = 20%
  5. 5.
    The user does not initiate withdrawal

Scenario 1: ETH expires at $1,400 (below strike price)

  1. 1.
    The covered call option expires worthless
  2. 2.
    Active position= 5 ETH
  3. 3.
    Profit = yield per epoch = 5 x 20% = 1 ETH
  4. 4.
    Post settlement balance = 5 ETH (active position) + 1 ETH (profit) = 6 ETH

Scenario 2: ETH expires at $1,600 (above strike price)

  1. 1.
    The covered call option is exercised
  2. 2.
    Active position= 5 ETH
  3. 3.
    Profit = yield per epoch = 5 x 20% = 1 ETH
  4. 4.
    Post settlement balance of the active position = 5 ETH x $1,500 (strike price) = 7,500 USDC
  5. 5.
    Post settlement balance of the profit = 1 ETH x $1,600 (settlement price) = 1,600 USDC
  6. 6.
    Total post-settlement balance = 7,500 USDC + 1,600 USDC = 9,100 USDC
  7. 7.
    The wheel vault then automatically changes from covered call-selling to put-selling mode now has a 9,100 USDC active position in the put-sell wheel vault and is earning yield in the form of USDC.
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Deposits Mid-Epoch
Last modified 7mo ago