# Welcome to Fig Tokenized hedge fund out of the box {% hint style="info" %} Not all investors are eligible to participate in Fig's yield protocol. Please see [Permitted Investors](/resources-and-legal/permitted-investors), and [Permitted Jurisdictions](/resources-and-legal/permitted-jurisdictions) on who may be eligible to participate in Fig's pools. {% endhint %} ## Problem **Crypto has a persistent yield problem.** Over the past 10 years, on-chain crypto wealth has grown exponentially. There are estimates of $150+ billion crypto assets looking for yield. These assets have been accumulated over years by crypto natives and will continue to stay on-chain. As wealth grows, generating income on idle assets is top of mind. Despite various attempts, yield on crypto assets remains low or unsustainable. Protocols like [Ethena](https://ethena.fi) have emerged, tokenizing perps funding to meet defi's demand for yield. However, cefi perps market for ETH is close to $15 billion at the moment, which is not enough to satisfy yield on $150 billion of on-chain assets. That is where Fig comes in. ## Overview **Fig is a yield protocol using options.** Through hybrid on and off chain mechanisms, Fig generates yield on crypto assets through delta neutral option selling (writing) by matching on-chain LP collateral with non-toxic option buy flow through traditional exchanges such as CBOE and CME. A spot exposure to BTC proxied via ETF is delta hedged with a short BTC futures and 15-30 delta call, creating a portfolio that: 1. Collects premium from weekly managed BTC spot ETF option selling 2. Current contango exhibited in the BTC futures. The LP positions are tokenized as Fig yield tokens `figUSD`. Since it represents a net USD value of the collateral assets, it is a fungible token that maybe traded on an automated-market-maker (AMM). Currently the yield generation strategy is managed by Volatility Research LLC, with steps towards [progressive decentralization](https://a16zcrypto.com/posts/article/progressive-decentralization-crypto-product-management/). See [Yield Mechanism](/protocol-mechanics/yield-mechanism) for details. ## How Can I Use Fig You can: * Upon approval for KYC and onboarding, deposit USDC or USDT into collateral pool in exchange for Fig yield token and track accrued yield and return. * Mint and burn yield tokens direct via Fig's on-chain protocol, available to KYCed and AML-screened counterparties * Stake yield token, figUSD, and earn points # Yield Mechanism ## What is the yield generation strategy? Fig generates returns through delta-neutral option writing strategy by combining long spot BTC ETF, short CME BTC futures, and writing weekly option contracts on BTC ETFs. These instruments are traded through traditional exchanges such as CBOE and CME. The combined portfolio is brought on-chain via tokenization as `figUSD` to allow for fungibility and liquidity for investors. Effective, on-chain buyers of `figUSD` posts their on-chain collateral to underwrite BTC ETF options, sold to option buy flow from traditional markets. The sources of returns are * Inherent BTC futures trading premium to spot (i.e. basis yield) * Option writing premium on out-of-money calls on BTC ETF ## What is option writing? Option writing is a yield generation strategy in which investor: 1. Post a collateral (margined or full payout) 2. Create an options contract on the posted collateral 3. Sell the option to generate an income or premium Fig's option writing strategy targets writing 15-30 delta weekly call options. ## What is being traded to generate the yield through Fig? Fig's collateral pools specifically hold the following positions to generate returns: 1. (100%)Long BTC spot ETF, such as [IBIT](https://www.ishares.com/us/products/333011/ishares-bitcoin-trust), [FBTC](https://www.fidelity.com/etfs/fbtc) 2. (70-90%) Short CME BTC futures, 3. (100%) Write BTC ETF 15-30 delta call options All positions are held on traditional finance exchanges and platforms. ## What is being traded to generate the yield through Fig? ## What are the risks? For detailed risk disclosures, please see Risk Disclosures. As a quick high level summary: 1. Yield tokens through Fig does not have guaranteed value. This means they are not stablecoins, ## Thesis & Key Assumptions There are reWith more capital inflow, volatility of a previous nascent asset like Bitcoin will likely fall. Although episodes of higher volatility will inevitably arise, Bitcoin and Ether's asset volatility will naturally compress with more capital inflow and with continued maturity of cryptocurrencies.

BItcoin's annualized realized volatility - source: Glassnode. As an asset matures, its general price volatility declines.

# Delta Neutral Option Writing # Yield Tokens `figUSD` r # figUSD {% hint style="danger" %} `figUSD` is not a stablecoin. It is a liquidity provider token that represents units of account for the net asset value of the collateral pool against which options are written to generate yield. Hence its value will fluctuate. Please see [Risk Disclosures.](/protocol-mechanics/risk-disclosures) {% endhint %} The first collateral pool of Fig will be denominated in USDC and USDT, collectively USD stablecoins. Users can deposit stablecoins in exchange for figUSD, which is an LP token represents the net asset value of the protocol collateral pool. Fig is starting with stablecoin pool because demand and simplicity. There exists over $150 billion of stablecoins on-chain that are seeking alternative sources of yield. As all option writing collateral and premium are collected in USD, stablecoin pool provides users with ease of accounting and simplicity - deposit stablecoins, receive stablecoins back. # figETH (Coming soon) # Collateral Utilization Curve # Trust & Security ## Trust & Security At Fig, trust and security are of paramount importance, especially when dealing with digital assets. We understand that these issues are top of mind for our investors, and we are committed to maintaining your trust and ensuring the security of your funds through a multifaceted approach. ### Institutional Partners In both traditional finance (TradFi) and decentralized finance (DeFi), operating a fund involves collaborating with various reputable parties, such as asset managers, custodians, fund administrators, counterparties, and legal counsel. We recognize that the importance of these partnerships is amplified in the realm of on-chain finance, particularly when connecting on-chain capital to off-chain assets. Fig works exclusively with the most reputable and well-established partners across all functions. Our investment strategy involves allocating funds to United States Treasury Bills (T-bills) backed by the full credit and faith of the United State government. Option contracts are traded with some of the most reputable exchanges such as Chicago Board Options Exchange (CBOE) and Chicago Mercantile Exchange (CME) Invested stablecoins are exchanged for USD by leading crypto asset custodians. Once the funds are deposited and the LP tokens are issued, digital assets are off-ramped to Interactive Brokers who is both the custodian and the prime broker. ### Transparency & Disclosure At Fig, we believe that the standards for transparency and disclosure in on-chain finance should meet or exceed those in TradFi. We are committed to being fully transparent about our product and protocol details. Investors can access comprehensive information on our fund's strategy, underlying portfolio composition, current portfolio pricing, historical performance and risk, as well as the results of periodic fund audits. On the technical side, we maintain transparency about the audit status of any material code. ### Legal & Regulatory Compliance Fig takes legal and regulatory compliance extremely seriously. We adopt a conservative approach to risk management and invest significant resources in designing our products to be fully compliant with all applicable laws and regulations. Our team consults with multiple legal, tax, and regulatory experts to ensure that our fund maintains a conservative regulatory posture. By prioritizing trust, security, transparency, and compliance, Fig aims to provide our investors with a secure and reliable vehicle for investing in the rapidly evolving world of digital assets. # Risk Control Parameters
AttributeValue
Max pool collateralization LTV20%
Max % of collateral posted in single option position0.5%
Max single underlying asset concentration ratio10%
# Risk Disclosures ## Fig yield tokens are not stablecoins Fig's yield tokens are LP tokens which represents the holdings an investor has in one of Fig's collateral pool. The collateral pool is posted to write option contracts and collect the premium. The collateral pool may lose value due to options sold expiring in the money. ## Yield tokens may lose value Yield tokens are risk assets that may accrue return based on the option premium collected through the writing of options. ## # Onboarding and KYC # Permitted Jurisdictions The investor represents and warrants that their country of residence, incorporation, or principal place of business is not currently subject to sanctions or otherwise designated on any list of prohibited or restricted parties, including but not limited to the lists maintained by the United States Department of Treasury's Office of Foreign Assets Control (OFAC), the United Nations Security Council, the European Union, or any other applicable governmental authority. The investor agrees to promptly notify Fig Finance if their jurisdiction becomes subject to such sanctions or is added to any such list during the course of their investment." This statement does the following: 1. Requires the investor to confirm that their jurisdiction is not currently on the OFAC sanctioned list or any other similar lists maintained by international authorities. 2. Specifies that the jurisdiction refers to the investor's country of residence, incorporation, or principal place of business. 3. Obliges the investor to inform Fig if their jurisdiction becomes subject to sanctions or is added to any prohibited or restricted parties lists during the period of their investment. # Permitted Investors ## Accredited Investor Criteria[​](https://docs.ondo.finance/qualified-access-products/eligibility#possible-accredited-investor-criteria) *Must meet at least one:* **Individuals:** * **Common Choice:** natural person whose individual net worth, or joint net worth with that person's spouse (or spousal equivalent), at the time of purchase exceeds $1,000,000. (For purposes of calculating net worth individuals should exclude the value of the primary residence and the related amount of indebtedness secured by the primary residence up to its fair market value. Indebtedness secured by the primary residence in excess of the value of the primary residence should be considered a liability and deducted from net worth. In addition, any increase in the amount of indebtedness secured by the primary residence in the sixty (60) days prior to making the investment must be treated as a liability.) * **Common Choice:** natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse (or spousal equivalent) in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year. * natural person holding in good standing with one or more of the following professional certifications or designations or other credentials: (i) Licensed General Securities Representative (Series 7); (ii) Licensed Private Securities Offerings Representative (Series 82); (iii) Licensed Investment Adviser Representative (Series 65); or (iv) any other professional certification or designation or other credential from an accredited educational institution that the SEC may, from time to time, designate as qualifying an individual for accredited investor status. * natural person who is deemed to be a "knowledgeable employee" of the Fund, as such term is defined in Rule 3c-5(a)(4) of the Investment Company Act. * director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer. **Institutions:** * (i) bank as defined in section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity. * (ii) broker or dealer registered pursuant to section 15 of the Securities Exchange Act. * (iii) investment adviser registered pursuant to section 203 of the Investment Advisers Act or registered pursuant to the laws of a state. * (iv) investment adviser relying on the exemption from registering with the SEC under section 203(l) or (m) of the Investment Advisers Act. * (v) insurance company as defined in section 2(a)(13) of the Securities Act. * (vi) investment company registered under the Investment Company Act or a business development company as defined in section 2(a)(48) of that act. * (vii) Rural Business Investment Company as defined in section 384A of the Consolidated Farm and Rural Development Act. * (viii) Small Business Investment Company licensed by the US Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958. * (ix) plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000. * (x) employee benefit plan within the meaning of ERISA if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors. * (xi) private business development company as defined in section 202(a)(22) of the Investment Advisers Act. * (xii) organization described in section 501(c)(3) of the Code, corporation, Massachusetts or similar business trust, partnership, or limited liability company, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000. * **Common Choice:** (xiii) trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii). * (xiv) entity in which all of the equity owners are accredited investors. * **Common Choice:** (xv) entity, of a type not listed in paragraphs (i) to (xiv), not formed for the specific purpose of acquiring the securities offered, owning "investments" (as defined below) in excess of $5,000,000. * (xvi) "family office", as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act: (a) with assets under management in excess of $5,000,000, (b) that is not formed for the specific purpose of acquiring the securities offered, and (c) whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment. * (xvii) "family client", as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act, of a family office meeting the requirements in paragraph (xvi) above and whose prospective investment in the issuer is directed by such family office pursuant to paragraph (xvi)(c) above. ### Possible Qualified Purchaser Criteria[​](https://docs.ondo.finance/qualified-access-products/eligibility#possible-qualified-purchaser-criteria) *Must meet at least one* * **Common Choice:** (i) natural person (including any person who holds a joint, community property, or other similar shared ownership interest in an issuer that is excepted under section 3(c)(7) of the Investment Company Act with that person's qualified purchaser spouse) who owns not less than $5,000,000 in "investments" as defined below. * (ii) company that owns not less than $5,000,000 in investments, that was not formed for the specific purpose of investing in the Fund, and that is owned directly or indirectly by or for two or more natural persons who are related as siblings or spouse (including former spouses), or direct lineal descendants by birth or adoption, spouses of such persons, the estates of such persons, or foundations, charitable organizations, or trusts established by or for the benefit of such persons. * (iii) trust that is not covered by clause (ii) and that was not formed for the specific purpose of investing in the Fund, as to which the trustee or other person authorized to make decisions with respect to the trust, and each settlor or other person who has contributed assets to the trust, is a person described in clause (i), (ii), or (iv). * **Common Choice:** (iv) person or company that was not formed for the specific purpose of investing in the Fund, acting for its own account or the accounts of other qualified purchasers, who in the aggregate owns and invests on a discretionary basis, not less than $25,000,000 in investments. * (v) any qualified institutional buyer as defined in Rule 144A under the Securities Act, acting for its own account, the account of another qualified institutional buyer, or the account of a qualified purchaser, provided that (i) a dealer described in paragraph (a)(1)(ii) of Rule 144A shall own and invest on a discretionary basis at least $25,000,000 in securities of issuers that are not affiliated persons of the dealer and (ii) a plan referred to in paragraph (a)(1)(D) or (a)(1)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(F) of Rule 144A that holds the assets of such a plan, will not be deemed to be acting for its own account if investment decisions with respect to the plan are made by the beneficiaries of the plan, except with respect to investment decisions made solely by the fiduciary, trustee or sponsor of such plan. * (vi) any natural person who is deemed to be a "knowledgeable employee" of the Fund, as such term is defined in Rule 3c-5(a)(4) of the Investment Company Act. * (vii) any person ("Transferee") who acquires Interests from a person ("Transferor") that is (or was) a qualified purchaser other than the Fund, provided that the Transferee is: (i) the estate of the Transferor; (ii) a person who acquires the Interests as a gift or bequest pursuant to an agreement relating to a legal separation or divorce; or (iii) a company established by the Transferor exclusively for the benefit of (or owned exclusively by) the Transferor and the persons specified in this paragraph. * (viii) any company, if each beneficial owner of the company's securities is a qualified purchaser. # Not Investment Advice Fig, Fig Finance, or Fig Investments, in its entirety referred to as `Fig` is not providing financial or investment advice, either through this document or any other media over which the information of this website or document is transmitted through. # Glossary #### Delta Neutral A portfolio strategy in which the overall delta of the portfolio is zero, meaning the portfolio's value is not expected to change significantly with small changes in the price of the underlying asset. A delta-neutral portfolio is constructed by balancing long and short positions in the underlying asset and its derivatives (such as options) so that the positive and negative deltas offset each other. This strategy aims to minimize the portfolio's exposure to directional risk while profiting from other factors, such as volatility or time decay. Delta-neutral strategies are often employed by options traders and market makers to hedge their positions and reduce risk. # FAQ