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:
Post a collateral (margined or full payout)
Create an options contract on the posted collateral
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:
(70-90%) Short CME BTC futures,
(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:
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.
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