What Is Ribbon.finance?
Ribbon.finance Coin uses financial engineering to create structured products that deliver sustainable yield. Ribbon’s first product focuses on yield through automated options strategies. The protocol also allows developers to create arbitrary structured products through combining various DeFi derivatives.
Structured products are packaged financial instruments that use a combination of derivatives to achieve some specific risk-return objective, such as betting on volatility, enhancing yields or principal protection. Theta Vault is a new product that automates a covered call strategy to earn high yield on ETH. The vault runs a covered call strategy and sells out of the money call options on a weekly basis for yield.
The primary risk for running this strategy is that depositors could potentially give up upside in exchange for guaranteed yield. By selling a call option, users are basically promising to sell the asset at the strike price, even if it goes above it (a.k.a selling early). Because of this, if the price of the asset moves up significantly in a short period of time, it is possible for depositors to have “negative yield” on their ETH.
Ribbon.finance Coin Storage Key Points
|Coin Name||Ribbon.finance Coin|
|Circulating Supply||48,306,131.30 RBN|
|Source Code||Click Here To View Source Code|
|Explorers||Click Here To View Explorers|
|Twitter Page||Click Here To Visit Twitter Group|
|Whitepaper||Click Here To View|
|Official Project Website||Click Here To Visit Project Website|
Ribbon.finance Theta Vault, which is a yield-focused strategy on ETH and WBTC. The vault earns yield on its deposits by running a weekly automated options selling strategy. The vault reinvests the yield earned back into the strategy, effectively compounding the yields for depositors over time.The Theta Vaults run two options strategies to generate yields:
- 1.Covered call – Vault writes out of the money covered calls.
- 2.Put selling – Vault writes out of the money puts.
Theta Vault Yearn
Currently, funds held in Theta Vaults do not generate any yield, aside from writing options. Every Friday, the vault converts 100% of its USDC balance into yvUSDC by depositing USDC into the Yearn USDC yVault. This helps depositors gain exposure to the yield generated from Yearn on top of the options strategy.
Ribbon.finance Coin use the Vault terminology because it stems from the idea of depositing your assets into a vault and earning a yield on them, set-and-forget.Users can simply deposit their assets into a smart contract and will automatically start running a specific options strategy. This alleviates a majority of the gas problems by socializing the gas costs across all the vault depositors.
Instead of doing 3–4 transactions per week per user, the vault will do 3–4 transactions per week for thousands of users at once. This makes the user experience of using these Theta Vaults extremely straightforward and relatively cheap — deposit, wait for yields, and withdraw.
Covered Call strategy
The covered call strategy is a unique options strategy where you earn yield for selling potential upside of an asset. For example, if you are willing to give up potential upside of ETH going above $25k by the end of the year, you can get paid 2% in yield for selling a $25k call option. This is over 10x the yield you can earn by supplying ETH on Compound.
Ribbon.finance In the unlikely case that ETH goes to $30k, you would have given up $5k, but you are still tremendously up in USD terms — it is a win-win scenario for you because you only risk getting exercised when ETH absolutely moons.
How to produce long-term high yield sources and in the spirit of Defi, make them accessible to retail users?
Enter a new set of sustainable yield protocols. New investment strategies that bridge the worlds of TradFi and DeFi. Use cases include the tokenization of real-world assets (RWA’s) like account receivables, consumer loans in developing countries, non-collateralized loans or packaging complex trading strategies into structured products. These are the future of DeFi.
Ribbon.finance Coin present design relies on Opyn oTokens. oTokens are ERC20 token representations of an options contract, where each of them have a strike price and expiry. Owning oTokens is functionally equivalent to owning an options contract. This gives the oToken holder the right to redeem some amount of the underlying asset if the strike price is hit.In order to run an options-writing strategy, the Vault needs to be able to mint and short oTokens.
The Vault uses the users’ deposited funds to lock collateral into Opyn + mint oTokens, then sells them for a premium. The Vault’s collateral will be locked until the expiry of the oToken. This collateral is used to pay off oToken holders in the case that the options expire in the money.