ALGORAI FINANCE
Vault Strategy
Covered call options are sold on the TVL deposited by users into the vaults. The vaults automatically perform option writing on Fridays, and the option contracts are sold to whitelisted market makers who pay a premium. The premiums are deposited into the vault and represent the yield that users will receive. The premiums received are in the same currency as the deposit asset. The vault reinvests the yield earned back into the strategy, effectively compounding the yields for users over time.
Strategy Risk: If the spot price of the underlying asset is above the strike price of the option at contract expiry, the options will expire In-The-Money (ITM) and the vault would incur a loss of funds on a cash settlement basis (not taking into account the positive price appreciation of the underlying asset's value).
Users deposit into vaults
Users deposit ALGO assets into the vault. These assets are utilised as collateral to perform weekly option writing strategies.
Vault performs option writing
At 10am UTC Fridays, the vault determines the optimal strike prices for ALGO. In preparation for the option contract auction, the vault TVL is locked until the follow Friday, post settlement at 9am UTC.
Vault Sells Options to market makers
Whitelisted market makers participate in a blind auction and bid for the option contract that matures the following Friday. The winning market maker pays a premium to purchase the option contract.
Vault receives Yield
The premium paid by the market maker to purchase the option contract is deposited into the vault. This represents the yield for users.
Options mature OTM
The spot price of the asset is lower than the strike price at option maturity. The option expires out-of-the-money and no financial settlement take place. The vault keeps the premium paid.
Options mature ITM
The spot price of the asset is above the strike price at option maturity. The option expires in-the-money and a financial settlement between the vault and the market maker takes place.
Settlement to market maker proceeds
An amount of ALGO is withdrawn from the vault equal to the difference between the spot price of ALGO and the strike price at option maturity. This amount is paid to the market maker.
Users deposit into vaults
Users deposit ALGO assets into the vault. These assets are utilised as collateral to perform weekly option writing strategies.
Vault performs option writing
At 10am UTC Fridays, the vault determines the optimal strike prices for ALGO. In preparation for the option contract auction, the vault TVL is locked until the follow Friday, post settlement at 9am UTC.
Vault Sells Options to market makers
Whitelisted market makers participate in a blind auction and bid for the option contract that matures the following Friday. The winning market maker pays a premium to purchase the option contract.
Vault receives Yield
The premium paid by the market maker to purchase the option contract is deposited into the vault. This represents the yield for users.
Options mature OTM
The spot price of the asset is lower than the strike price at option maturity. The option expires out-of-the-money and no financial settlement take place. The vault keeps the premium paid.
Options mature ITM
The spot price of the asset is above the strike price at option maturity. The option expires in-the-money and a financial settlement between the vault and the market maker takes place.
Settlement to market maker proceeds
An amount of ALGO is withdrawn from the vault equal to the difference between the spot price of ALGO and the strike price at option maturity. This amount is paid to the market maker.
Users deposit into vaults
Users deposit ALGO assets into the vault. These assets are utilised as collateral to perform weekly option writing strategies.
Vault performs option writing
At 10am UTC Fridays, the vault determines the optimal strike prices for ALGO. In preparation for the option contract auction, the vault TVL is locked until the follow Friday, post settlement at 9am UTC.
Vault Sells Options to market makers
Whitelisted market makers participate in a blind auction and bid for the option contract that matures the following Friday. The winning market maker pays a premium to purchase the option contract.
Vault receives Yield
The premium paid by the market maker to purchase the option contract is deposited into the vault. This represents the yield for users.
Options mature OTM
The spot price of the asset is lower than the strike price at option maturity. The option expires out-of-the-money and no financial settlement take place. The vault keeps the premium paid.
Options mature ITM
The spot price of the asset is above the strike price at option maturity. The option expires in-the-money and a financial settlement between the vault and the market maker takes place.
Settlement to market maker proceeds
An amount of ALGO is withdrawn from the vault equal to the difference between the spot price of ALGO and the strike price at option maturity. This amount is paid to the market maker.

Vaults