Ribbon Finance
  • Introduction to Ribbon Finance
  • Aevo
  • FAQ
    • General
    • DOV Deposits
    • DOV Withdrawals
    • DOV Trading and options
    • Ribbonomics
  • Dune dashboards
  • Contribute
  • Security
  • Ribbon Theta Vaults
    • Introduction to Theta Vaults
      • Strike Selection and Expiry
      • Options Architecture
      • Options Settlement
      • Auctions
      • Risk profile
      • Fees
    • Theta vaults architecture
    • User guides
      • How to deposit
      • How to withdraw
      • How to pause and resume
      • How to stake, unstake vault shares and claim rewards
      • How to transfer vault positions
      • How to participate in Paradigm Auctions
      • How to redeem oTokens
  • RIBBON EARN
    • Introduction to Ribbon Earn
    • Ribbon Earn USDC
      • Risk-Free Rate
      • Twin win strategy
      • Vault specifications
      • Eligibility
      • Fees
    • Ribbon Earn stETH
      • What is a dolphin strategy?
      • Vault specifications
      • Risk profile
      • Fees
  • RIBBON LEND
    • Introduction to Ribbon Lend
      • Yields from unsecured lending
      • No lockups
        • Pool status
        • Default
      • Off-chain enforcement / credit underwriting
      • Built-in insurance
      • Fees
  • ribbon treasury
    • Introduction to Ribbon Treasury
      • Why Ribbon Treasury?
      • Partners
      • How to get involved
  • Ribbonomics
    • Overview and RBN tokenomics
      • Vote-Escrowed RBN
      • Fee Collection and Distribution
      • Liquidity Gauges and RBN Emissions
      • Gauge Weight Voting
      • Bribes
        • Guide to Boost Bribing
          • For Bribers
          • For veRBN Holders
      • Upgrades
    • How to lock RBN, boost and claim protocol revenues
  • Developers
    • Deployed Contracts
    • Ribbon Subgraph
Powered by GitBook
On this page

Was this helpful?

  1. Ribbon Theta Vaults
  2. Introduction to Theta Vaults

Options Architecture

Theta Vaults in its present design relies on Opyn oTokens. oTokens are ERC20 token representations of an options contract, where each of them have a strike price and expiry. Owning oTokens is functionally equivalent to owning an options contract. This gives the oToken holder the right to redeem some amount of the underlying asset if the strike price is hit.

In order to run an options-writing strategy, the Vault needs to be able to mint and short oTokens. The Vault uses the users’ deposited funds to lock collateral into Opyn + mint oTokens, then sells them for a premium. The Vault’s collateral will be locked until the expiry of the oToken. This collateral is used to pay off oToken holders in the case that the options expire in the money.

Opyn options are cash settled, so if the options expire ITM, there is no transfer of the underlying: the difference between the strike and the market price at expiry will be compensated by liquidating part of the deposits.

Also, Opyn options self exercise at expiry if ITM. In these docs you'll find more details about settlement and redeeming.

PreviousStrike Selection and ExpiryNextOptions Settlement

Last updated 2 years ago

Was this helpful?