Vault Strategy

Let’s reconsider an example numerically.
If Ethereum is trading around $1820, the price of a call option with a strike price of $1800 expiring in 7 days would be $92. This option has a delta of 0.56 and let’s assume 1x leverage for the futures position.
Total cost = Option Price + Futures Margin = $92 + 0.56 * $1820 = $1111.2
Market moves up
Let’s say after 6 hours, Ethereum is trading at around $1910; the same option’s price would be $149. We have a made a profit of $57 from the option’s position, but have made a loss of $50.4 (0.56 * $90) from the futures position. That’s a total profit of $6.6 per unit size.
Market moves down
If Ethereum is trading around $1730 after 6 hours, the option’s price would be $49. That’s a total loss of $43 from the option position, but we have made a profit of $50.4 (0.56 * $90) from the futures position. That’s a total profit of $7.4 per unit size.
Market stays neutral
This is where the vault loses money. Let’s say Ethereum is trading around $1810 after 6 hours, this would mean that the option’s price would be $85. That’s a loss of $7 from the option position and we have only made $5.6 profit from the futures position. This would give a total loss of $1.4 per unit size.
Market moves up
Market moves down
Market stays neutral
profit of $6.6 per unit size
profit of $7.4 per unit size
loss of $1.4 per unit size