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).