How does this vault work?
Last updated
Last updated
This innovative strategy merges DeFi fixed-yield products with the purchase of options, effectively forming a capital protection product. This approach is designed to safeguard an investor’s capital while providing exposure to potential market gains. Here’s a breakdown:
1. Capital Protection through Zero-Coupon Bonds:
At the core of this strategy lies the investment in zero-coupon bonds. These bonds do not pay interest during their life but are purchased at a discount to their face value. Upon maturity, they return the full face value, thus ensuring the initial capital invested is protected.
2. Enhanced Market Participation through Options:
With the capital secure, the remaining funds are allocated to buying options. This choice grants the investor a fixed, predetermined level of participation in potential exposure of the market, providing an opportunity to maximize profit with principal protected.
This dual strategy leverages the stability of zero-coupon bonds to protect the principal while using the speculative potential of options to engage with market movements more aggressively. This combination offers a balanced approach to capital growth and protection.
