Wedding Cake Strategy
The Option-Boost Staking Vault has incorporated the wedding cake strategy, an option-based approach that provides a predetermined payout depending on the movement of the underlying reference rate within set boundaries. This strategy has been chosen because it generates optimal returns while keeping risks at a manageable level, which helps to safeguard the principal.
Depending on the users' risk tolerance level, different amounts of funds will be allocated to execute option trading. The Basic Tier ensures complete protection of the principal, while the Advanced Tier offers 90% protection of the principal. Thus only funds deployed in option trading funds are used to run this strategy.
ETH spot price = $1200
The above graph is a real-life example of ETH wedding cake strategy, with a reference rate of $1,200. It shows how depositors can benefit from fixed payouts based on the movement of the underlying asset within pre-defined boundaries.
- If the settlement price of ETH falls within the boundaries of $1,300 to $1,400, depositors receive a payout of 224.3%.
- If the settlement price of ETH falls between $1,200 and $1,300, depositors receive a payout of 116.2%.
Additionally, in situations where the market experiences extreme fluctuations and the price of ETH exceeds the defined boundaries of the wedding cake strategy and the option become worthless, depositors are still eligible to receive their initial deposit through the LP mining fund, ensuring that their principle is protected. This way, they are able to benefit from market volatility while securing funds.