• General

  • Request for Comment - Pilot Deposit to Dopex Platform

Summary: Seek authority from the community to do a pilot deposit into Dopex with $333k worth of ETH. This is approximately 1% of the current treasury holdings of ETH. Following this pilot, if deemed successful the DAO will move forward with whitelisting the platform for further treasury growth.

Background: As DeFi has matured a number of protocols revolving around options have come to fruition. These protocols are an effective way to take advantage of market conditions with a different risk profile.

Recently, OlympusDAO launched gOHM single-sided options vaults in collaboration with Dopex, a decentralized options exchange. The Dopexand Olympus teams share many common values, including the importance of decentralization and risk management. Additionally, the Dopex team has officially announced a partnership with an Olympus SubDAO, the Redacted Cartel, as well as anOlympus Partner - Umami Finance. Over the course of the next few months the Dopex team will be launching several products in collaboration with protocols whose tokens are also owned by Olympus.

The DAO treasury team will work with strategic advisors from the Dopex team that have extensive experience with option markets. Through this collaboration, the treasury team along with the advisors will manage risks accordingly to maximize benefit to the treasury. 

Description from docs.dopex.io: Dopex is a decentralized options protocol which aims to maximize liquidity, minimize losses for option writers and maximize gains for option buyers - all in a passive manner for liquidity contributing participants.

Currently, Dopex has Single-Sided Options Vaults (SSOVs) which allow users to lock up tokens for a specified period of time and earn yield on their staked assets. Users will be able to deposit assets into a contract which then sells your deposits as call options to buyers at fixed strikes that they select for end-of-month expiries.

Risks: The contracts for Dopex have been audited and the team has an internal contract revision policy in place. From a protocol-level, Dopex is on Arbitrum - this adds a layer of risk as it is an L2, but at the same time Arbitrum is still secured by Ethereum L1. If Arbitrum is to go down, the treasury funds are safe and are accessible once the L2 is live again or these funds are bridged back to L1 (which would take 7 days but can be done without relying on the Arbitrum sequencer). From a market perspective, the protocol usage enables greater control of the treasury’s risk - i.e., itallows for hedging unwanted risks and scaling risks up to the DAO’s comfort level.

Options epochs are 1 month in length and expire last Friday of every month. The options are settled automatically at the time of expiry - no action to be taken by the DAO. It is important to note the inherent risks of participating in option markets. The DAO treasury team will be working directly with advisors from the Dopex team on approaching these risks.

Dopex is also working on building a secondary market and an OTC platform to allow for DAO and treasury to sell options prior to the expiry. We believe Dopex will continue releasing innovative products that will provide Olympus with many different ways of generating revenue on its assets. 

Motivation: A successful pilot deposit for Dopex will allow Olympus to whitelist the platform for further treasury growth opportunities and risk management solutions.

Proposal: Allow for pilot deposit of $333k of ETH (~1%) to the Dopex platform for farming.

Allow for pilot deposit to the Dopex platform

This poll has ended.

What strike price will you set? If it’s too out of the money the APR will be negligible. If it’s too close to current price, then there’s risk of ETH getting sold.

Why not just stake ETH on LIDO?

  • json replied to this.
  • Cc2 likes this.

    Asfi We will be spreading the risk across multiple strike prices based on targeting a specific return and minimizing loss risk.

    Lido is another option we're considering doing to acquire more ETH but we need to decide which platform we want to go with and naturally go through governance. We're currently proposing only allocating 5% of our total amount of ETH at any one time to an options platform.

        Very bullish on Dopex and its team, so this is good business. The $333k ETH deposit for farming goes into where:

        a. SSOV-ETH

        b. One of their four farms

        c. Or it’s just lending to Dopex

          devoltaire For the pilot it will go into their SSOV, however, we hope to continue to partner with them and use their platform for the multitude of launches to come.

            json I think staking ETH will be an easier first step than covered call writing.

            Premiums are nice, until the call is exercised.

            Without knowing the target APR, strike price range and how the options APR compares to staking APR, I don’t feel comfortable voting yes on this.

            Curious to hear what others think.

                Asfi We're pursuing both actively, we aligned on what options platform we wanted. We did not align on which staking solution we want to do. These will be separate endeavors. ETH staking is next on the list to align to. Again, this will only take up 5% of the ETH we hold, staking will take up more and requires more consideration in terms of centralization risk and network effect within DeFi protocols. (i.e rocket pool vs Lido)

                Additionally, we're close with the Dopex team and there are a lot of things coming up where Olympus will be able to gain treasury growth with very minimal risk. This is just a first step. Lastly, JonesDAO is currently going through incubator and they operate on top of Dopex first, their solution to managed vaults is something that can be enticing for DAOs, a set-it and forget-it approach to options.

                  Asfi I think the return is secondary while “partner… for the multiple launches to come” is primary

                  • Asfi replied to this.

                      devoltaire I get that. I’m a DPX holder too and love what they’re doing. In my mind staking was always lower risk than covered call writing. But fair enough, worst case this call is exercised and we’ve got a bunch of stablecoin.

                          Asfi and I fully agree with all your points. They are all factually correct. My takeaway is this is up-only from an overall point of view🙂

                              Frens, useful to understand how Dopex works here

                              @Asfi Dopex SSOVs is not a full options platform, the call you write doesnt get exercised for stablecoins

                              In simple terms, at expiry:
                              - If price < strike, you earn premium
                              - If price > strike, you still earn premium but you lose ((price - strike) / price) * numberOfCallsSold

                              A calculator for all this: https://dopex.revofusion.io

                              In this instance, if OHM deposit ETH at $3300:
                              - It will be positive in USD Value if ETH is >$2997 at expiry
                              - It will be positive in ETH Value if ETH is <$4443 at expiry

                              Even if ETH price goes up to to $5000, OHM will only lose 0.1 ETH per 1 ETH deposited, and be up a lot in USD Value.

                              • Cc2 likes this.

                              devoltaire to some extent I share the view of asfil. Orca has been shilling dopex and ever since then Ohmies are no longer in the front lines and sorta down and small ups only. Building legs of OHM makes sense and I’m not against the proposal but the pros and cons should be delineated well. I wrote call for certain strike levels and the return was almost zero. The team would need to spend lots of time in managing positions well to avoid losses when options are ITM at expiring and to ensure profits. It would need to be more clear what is there for Ohmies if this is the way to go I think.

                                  While I agree with concerns that this strategy can expose the Treasury to losses (in this case, in ETH terms), I do believe working with some of Dopex team members can help us define a clear risk profile for Olympus and then adapt our call writing strategy based on that. @json I think it should be clarified whether Olympus would have assistance/guidance from Dopex each EPOCH or not ?

                                  More generally, I view this as a first step of a fruitful collaboration with Dopex & their upcoming products release that should present new risk-free yield opportunities for Olympus.

                                  • Cc2 likes this.

                                  Asfi I have to agree with Asfi on this one. Staking ETH or depositing into vaults that automatically run covered call strategies like Ribbon would be preferable to manually writing strikes ourselves. This proposal turns the Treasury team into more of a hedge fund and I'm worried that we won't have much insight into the process for selecting strike prices. It's one thing to say that we'll be spreading risk across strike prices, but it's not my understanding that we have expertise in this area.

                                  If this proposal passes, I think that Treasury should be responsible for publishing the strategy and justification for selecting strike prices each epoch (1 month). Ideally this would be benchmarked against simply holding ETH and staking returns.

                                    i would be for more for the hedge than yield. olympus team monitors the key data/kpi so we should have an hedge knowing when the market is overextended and options may help bring more stability to our treasury

                                    i'm a big fan of dopex, dope product and amazing team, also community has ohmie like vibe, can recommend the protocol

                                    I agree with everyone that dopex is an awesome and we should explore this diversification of risk, even if it requires more bandwidth than an automated strategy. I agree with @json 's point that we should look more towards partnering with JonesDAO than manually handling the same responsibility in separate compartment. My question is whether we should go forward with this as a stopgap solution that can be phased out if better solutions are available later.

                                    Guys, in general think about Dopex as a solutions provider.

                                    Need active management, alpha extraction? Olympus can do it directly using Dopex or delegate to JonesDAO.

                                    Need an access to hedging, risk-mitigation, risk management solutions that the treasury will need on a case-by-case basis? Access to Dopex can help by a lot.

                                    Need some bespoke products, vaults, ways to access to solutions while not taking excess risks? This also can be built together.

                                    All in all - think about Dopex in broader terms, as a Swiss knife, don't focus on just one way to utilize the protocol.

                                    forgottenname Same here. I wrote far OTM covered calls and its just picking pennies. I feel this proposal is not to be evaluated through the optics of yield but rather the benefits that will accrue as a result of the collaboration initiated through the DAO investment. From what I gather from the comments:

                                    1. potential opportunities and partnerships for Olympus with Dopex's new launches (seems like many upcoming)
                                    2. close collaboration with Dopex team provides added insights into our own risk management strategies

                                    These intangible benefits could offset even a zero P&L from the SSOV-ETH. Also the proposed ETH deployment is not a binary - staking will still happen, so this is just employing ETH on multiple fronts.

                                    Balotelli45 and tex also raised very good points that should be addressed and to add, since this is a pilot deposit, at which point/ under what criteria, do we decide that this is not a suitable product to deploy our treasury assets into?

                                        devoltaire yes I see your point and that’s why i was not against it outright. I believe the reasons you outlined and others too do justify this proposal. I think the community has been a bit defragmented due to many changes happening (forks, migration etc) and it will be now more important to highlight why proposals are good from OHM Dao view point. I have seen (more and more peeps) commenting in the spaces that shilling orcas projects and others were kind of at the expense of ohm. This is crypto defi so things move fast but since OHM is there to stay community should be fed with info why proposals are strengthening OHM so they have incentive to continue to be OHMIes. Anyhow, tl,dr, more explanation and reasoning that it benefits OHM, the better.

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