$PERP Vault: A Case Study On Treasury Management
Treasury management has become a hot topic as we’re reminiscent of the mistakes made in the last bull run repeating again. Protocols were forced to sell their tokens during a turbulent market to stay afloat, fund their operational costs, and sustain their future developments. According to openorgs.info DAOs hold as much as 100% of their Treasury in their native token which may be a double-edged sword if mishandled.
Last November we introduced Ribbon Treasury - our vault offering curated into a service for Protocols. Through this private offering, Protocols can customise parameters such as: strike selection, tenor, and choice of currency to receive their premium in.
In this post, we’ll review the vault performance of our launch partner, Perpetual Protocol. The custom strategy deployed in the Covered Call Vault has the following parameters:
Monthly expiry
25% OTM strike selection
Premiums paid in $USDC
Below is an overview of the $PERP vault performance since deployment:
*APY is calculated by extrapolating the yield
25 February 2022 Expiry:
The vault sold the $7.60 Strike Call and earned ~8.50% of yield in $USDC. As a trial run the vault was seeded with 200,000 $PERP ~$1M at the time and earned ~$17k in premium.
25 March 2022 Expiry:
The vault sold the $6.30 Strike Call and earned ~12% of yield in $USDC. Since the successful trial run, Perpetual Protocol upped their seeded amount to 492,392 $PERP and earned ~$59k in premium.
29 April 2022 Expiry:
The vault sold the $5.90 Strike Call and earned ~11.58% of yield in $USDC. 499,396 $PERP was rolled over and earned $57.8k in premium.
27 May 2022 Expiry:
The vault sold the $4.40 Strike Call and earned ~9.71% of yield in $USDC. Perpetual Protocol added 40k $PERP to the seeded amount totalling 539,396 and earned ~$52.3k in premium.
24 June Expiry:
The vault sold the $1.40 Strike Call and earned ~5% of yield in $USDC. Maintaining the same $PERP balance as the prior contract, the protocol earned ~$26.9k in premium.
All contracts expired out of the money with no drawdowns. As of today, the total amount seeded into the $PERP vault is ~$318,243. Since deploying the custom Covered Call Vault in February, Perpetual Protocol earned a total of ~$213,262 in premiums without having to sell a single $PERP token. The vault ultimately earned almost as much in premium as the value of the seeded amount.
Although there is a risk of the vault expiring in the money, deploying the monthly Covered Call Vault with a 25% OTM strike selection has proved to be an optimal strategy during a downtrend market. Ribbon Treasury helps Protocols generate a sustainable income in addition to their existing revenue stream. If you’re interested in exploring our offering, please reach out to us via Twitter or Discord.
