Pods Yield First Strategy: stETHvv
stETHvv (Eth Volatility Vault) is our first strategy. It focuses on getting a consistent yield on ETH on Ethereum Mainnet and takes advantage of high volatility periods, where it can yield more.
stETHvv strategy relies on Lido (the largest staking service in DeFi with billions in volume) for the base yield source and uses part of the yield to set up a derivatives strategy.
Specifically, the vault manager uses 50% of the yield to set up a weekly strangle.
It buys calls and puts from 10% to 20% OTM and takes them to maturity.
The strategy relies on Lido (the largest staking service in DeFi with billions in volume) for the base yield source. The vault manager uses part of the yield to do a strangle strategy by buying call and put options (that are from 10% to 20% OTM) on a weekly basis, which is also called a strangle strategy in options.
The current market is quite unpredictable and knowing which direction ETH price will go is no easy task. The only thing we’re sure about is that the volatility will continue to happen massively in crypto, so why not bet on it?
You can read more about the backtesting results simulating returns from 2015 until July 2022 in the blog post below:
This graph shows the result of a backtested strategy for each strategy for seven years:
- Pods stETHvv vault,
- ETH invested at 3.9% a year and
- Just holding ETH
What is a Strangle in Options?
A strangle is a popular strategy within the options world and involves holding both a call and a put on the same underlying asset and maturity. Its primary value is higher returns when the underlying asset has ample price movements, regardless of the direction (up or down).
One of the sides will most likely win in a highly volatile market such as ours. If ETH price goes up, the call option could end in-the-money. If its price goes down, the put option could end in-the-money. This is what makes the strangle strategy so interesting for this moment.
The options will be cash-settled, which implies that only the difference between the counterparts should be offset, decreasing the capital intensity of this strategy. This also means less friction as the manager will not have to move all the funds when exercising their position.
In the contracts, this permission will be coded so that the manager can only access the generated yield (no other funds) at any given time.
Who is this product made for?
This strategy is perfect for those that hold ETH and want to accumulate more ETH over time. It uses ETH’s volatility in its favor and earns more every time ETH price bounces more than 10% ~ 20%, up or down.
How to use Pods Yield
1. Connect your wallet:
2. Select the strategy you want to use to increase your yield:
3. Input the amount to deposit on the Request (Deposit) tab on Actions and click on Allow:
5. Finally, deposit the stETH into the strategy’s vault:
Here is a quick video on how to use our new Pods Yield product:
About Pods
Strategies, vaults, primitives, or tooling. We are building DeFi as we would like to use it.
We invite you to take the first step in your new mission: start testing the Pods Yield app on https://yield.pods.finance/
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