Dear All,
This is Jake from Bastion Trading.
We are a trading firm and market maker involved in Crypto since 2017, and been involved with quite a few DAOs in the recent years in various capacities. With Truefi and Clearpool, we have been borrowers of stablecoins and even through the turbulence of 2022 we have returned all funds we have borrowed with interest. As a trading firm, we have supported Rook DAO (in their coordiation game) as they sought earlier to expand their MEV and liquidity capacities. More recently, we took a active role in 2022 in the Wonderland DAO, from managing the treasury to making (what we think) are positive governance improvements over that time. We are still involved as our chairman is still a signatory for the treasury there.
We have a keen interest to be honest though in options and how they can benefit users to create a optimal program for things such as buybacks. We could not help to think how options can create material value leaning on buyback strategies - especially the TWAMM FXS Buyback Program. Upfront, we would like to suggest a way for Frax Finance to implement the Buyback Program, while also generating extra yield.
Yield Generation Methodology
• Generate extra yield through put options selling in the form of premium
• Frax Treasury has the obligation to buy corresponding $FXS at each strike price if Bastion exercises the option
• Put options strikes and tenors can be customized for the best interests of Frax Treasury and $FXS holders
Just as a demonstration on 1 million USD program with strikes and maturity, the below table shows indicative APYs that Frax Treasury can generate:
$FXS Spot Reference: 5.6
Depending on strike levels, Frax Treasury can earn up to ~60% APY if $FXS price stays above the strike price. If $FXS price falls below the strike levels at the maturities, Frax Treasury needs to buy at the strike levels, which are below $5 USD. Bastion Trading is willing to physically deliver $FXS to Frax Treasury.
I think this is an attractive opportunity for FRAX given that it lets FRAX Treasury implement its BuyBack Program, while at the same time earning extra yield. We welcome any feedback and hope we can come up with the best BuyBack strategies that benefit Frax Finance and $FXS holders. Of course, please feel free to respond below on this chain or direct message me at @Jbastion in Telegram.
For a background for Bastion Trading please look over:
- Twitter Accounts (ayko2718, TheSkyBomber, TheSkyhopper *Chariman Emeritus)
- Wonderland Treasury Manager Proposal and Snapshot (Proposal - Bastion Trading / TheSkyhopper to manage or advise on Wonderland Treasury - #21 by ElParada - General Discussion - Wonderland Governance Forum)
- Website (https://bastiontrade.com/)
- Truefi Proposals for borrowing
Regardless of the outcome of this particular proposal, we hope this can be start of some engaging discussion with the FRAX FXS community as in Crypto, we never know where things go!