After reviewing your Roadmap for 2024, it’s clear that your protocol is deeply committed to fostering a sustainable, accessible, and empowering financial future for everyone. With this mission in mind, I am excited to propose an innovative approach to achieving sustainable yield for the protocol through the use of on-chain covered call strategies. This method will enable the protocol to realize its vision by enhancing financial sustainability and accessibility.
The idea is to leverage a portion of Sperax DAO treasury for covered call lending. This approach involves lending out a smaller part of currently idle $SPA tokens. By doing so, Sperax DAO can generate significant upfront revenue in USDC. The earned USDC can be immediately utilized for community needs. And unlike a simple token sale, covered call lending enables the treasury to diversify its holdings into stable assets without an immediate market impact.
• Idle $SPA tokens can be used to generate upfront USDC revenue
• Immediate revenue and liquidity for operational and developmental activities
• Diversification of the treasury into stables
• Tokens don’t need to be sold, thus there’s no immediate market impact
The diagram below shows indicative upfront premiums (as of 08. February 2024) that Sperax DAO could earn across various loan duration (Days to Expiry) and upside cap (Relative Strike Level) combinations.
For instance, Sperax DAO lends $100k worth of $SPA for 90 days at a 110% upside cap. In turn, Sperax DAO gets approx. $20k USDC upfront.
If the $SPA price remains below 110% after 90 days, the originally loaned $SPA is returned. If it exceeds 110%, Sperax DAO receives $110k USDC (and still keeps the initial $20k USDC upfront).
This proposal outlines how the Sperax DAO can generate USDC cash revenue by using idle $SPA treasury for covered call lending. This approach not only diversifies the treasury but also avoids market impacts that could arise from outright selling $SPA tokens. I’d love to hear the community’s thoughts on this idea and more than happy to outline a detailed draft.