The Brazilian protocol decentralized finance Pod funding launched a new investment product based on Ethereum derivatives (ETH) offers low-risk strategies, without recourse to leverage or settlement risks, for investors to maximize their returns in ETH, depending on the volatility of the asset.
Announced on July 12, the first strategy made available by pod yield it is called stETHvv (Eth Volatility Vault) – ETH Volatility Vault, in loose translation. The product exploits the fixed returns offered by the staking the liquidity of Lido Finance (LDO) combined with a strategy of options in which the investor holds positions in both a call option and a put option, with different strike prices, but with the same expiration date and the same underlying asset.
This is a strategy used in the world of traditional finance so that investors can take advantage of and protect themselves from the volatility of the asset at the same time, maximizing their returns.
stETHvv generated consistent results last week, producing returns 11 times higher than those offered by Lido Finance, as Pods Finance’s profile highlights in a Twitter post on Thursday 28th.
stETHvv returned 0.85% last week 💰🤑
— Pods (@PodsFinance) July 28, 2022
** stETHvv update **
Last Friday, our options expired in-the-money and because of that, stETHvv returned 11 times (!!!) more than @LidoFinance (ETH base return) in the same week. 🤑
Cheers to flight, frens 🎉
oh stETHvv returned 0.85% last week 💰🤑
— Pods (@PodsFinance)
According to the developers of Pods Finance, the investment strategy offered by Pods Yield is “perfect for anyone who holds ETH and wants to accumulate more ETH over time because it uses the volatility of ETH to their advantage and generates more returns. every time the price of ETH rebounds”. , upwards or downwards.”
stETHvv does not depend on any kind of prompting. It essentially applies a derivatives strategy, accesses the price of market and executes the best strategy for the benefit of investors in the face of ETH price volatility.
Plus, it’s easy to make. Investors can access complex investment strategies with just one click, withdraw at any time without a grace period, and view only actual returns on the amount deposited.
According to the Pods developers, if the strategy had been available since the launch of Ethereum in 2015, it would have performed much better than Lido, which grants fixed returns of 3.9% on ETH held in staking no protocol.
Chart with strategy backtest. Source: Pod Funding
The graph above shows the result of a retrospective projection over the last seven years comparing three different strategies: investing based on the Pods stETHvv Vault (purple), keeping the ETH held in ssocket on Lido (blue), and just keep ETH sitting in the wallet (red).
“In the stETHvv choke setup, we estimate the purchase of call and put options using 50% of the weekly return. This also takes into account weekly OTM options at 20%, priced with Black Scholes and assuming an implied volatility of 90%.This backtesting also assumes that stETH is always equal to one ETH.This graph shows the performance of the vault each time there is an exercise.The profit amount for the exercise is incorporated into the initial deposit and the following week will increase the return on that newly added sum. You can identify exercises on the chart by checking when the scale moves up a level or notch.”
The only risks are related to the Lido and a possible vulnerability of the smart contracts pods. The Pods Yield smart contract audit is ongoing but not yet complete.
Despite this, the protocol is exposed to the following risks: possible deficiencies or operational failures of the network Ethereum after the merger; governance attacks, exploits or smart contract bugs; and liquidity issues arising from a possible loss of parity between ETH and stETH, the derivative distributed by Lido in a 1:1 ratio for Ethers deposited on its platform.
As Cointelegraph Brasil recently reported, make Ether deposits on Lido Finance is one of the main strategies that investors can use to benefit from the returns offered by Ethereum 2.0, even before the network transition completed for the consensus mechanism based on proof of stake (PoS).