Jun 7, 2021
Product Issue 19: C-OP Performance in Production
TLDR
C-OP LPs (liquidity providers) have earned 160% APR in premiums and 668% APR once Geyser rewards are considered.
9 C-OP policies have been written, with a $ win:loss ratio of 29:1 for LPs.
Uniswap ETH-UNN Geyser 2.5 million 90 day program to launch for Uniswap V2 upon expiration of current Geyser. Vote to be held in next 90 days on whether following Geyser should be on Uniswap V2 or V3.
It’s been almost a month since the launch of C-OP and half a month since the launch of pUNN Geyser. In this issue we review the economics of C-OP from the lens of a liquidity provider (LP).
At the time of this writing, nine C-OP policies were purchased for a total of $23,156 in premium. From this premium, 10% was sent to pool reserve and 10% to the Foundation reserve, leaving $18,524 paid to LPs.
From the seven expired policies, one was exercised for a payout of $635. The remaining two unexpired policies are currently out-of-money (OTM). Out-of-money means the strike of the C-OP is below the current spot price and can not be exercised at this time.
From an LP perspective the $ win loss ratio has been a respectable 29:1. While our dataset is still very small, we see an outcome similar to typical option writing: the majority of C-OPs expire worthless.
How much liquidity has been provided over the last month? Excluding a spike on May 22nd, the average liquidity in the pool over this period of time was $140,000.
With some simplifications, we can estimate the total APR received by LPs. Assuming no compounding over the last 30 days, the premium alone annualizes to ~160% APR. Once you factor in the pUNN Geyser incentive, emitting 55,555 UNN a day to pUNN staked, things get even better. Assuming average price of $0.035 / UNN over the last 30 days and all pUNN staked in Geyser, LPs were earning an additional $1,944 /day.
Annualizing the return of pUNN Geyser in addition to the premiums received, LPs received ~668% APR.
What were the purchase dynamics of C-OP? As an LP, getting insight into these dynamics could help you manage your risk expectations. Let’s plot the C-OP purchases relative to ETH Price.
Green umbrellas represent C-OP that expired without being exercised. Red umbrellas represent exercised C-OPs. Purple umbrellas represent C-OPs that are still active. On top of each umbrella we show the strike, term, and amount of units in each C-OP. For example, the first umbrella starting from the left, dated 5/20th had a strike of 2650, a 1-day expiration, and 50 ETH.
We will continue sharing our observations periodically to give liquidity providers and C-OP buyers alike transparency.
To remind, all C-OP at this early stage of launch is fully collateralized so payment is always guaranteed. The reserves are set aside for black-swan events as leverage is introduced. Furthermore, the foundation reserve will be shared with UNN holders as announced here.
Uniswap Geyser Program II
The current ETH/UNN Geyser program will end in 8 days after emitting 50 million UNN tokens over 180 days to our Uniswap liquidity providers.
As Uniswap ecosystem is still transitioning from V2 to V3, we will:
- Launch an interim program for 90 days emitting 2.5 million UNN tokens. Current LPs will have to restake in the new program. LPs do not have to unstake from Uniswap, just from the current Geyser program. Instructions and additional timing details will be shared separately.
- Hold a vote with the UNION community on whether the next Geyser phase should be on Uniswap V2 or V3.
About UNION
UNION is a technology platform that combines bundled protection and a liquid secondary market with a multi-token model. DeFi participants manage their multi-layer risks across smart contracts and protocols in one scalable system. UNION decreases the entry barriers for retail users and lays the foundation for institutional investors. UNION’s full-stack DeFi protection is inclusive, composable, and brings battle-tested capital and pricing models from TradFi to the DeFi ecosystem.
Website: https://www.unn.finance/
Twitter: https://twitter.com/unnfinance
Telegram: https://t.me/UNNFinance
Telegram ANN: https://t.me/UNNFinanceANN
Disclaimers
1) This announcement is for informational purposes only and is not an offer to participate. Never send virtual assets to a smart contract you cannot afford to lose. This announcement does not constitute financial advice.
2) UNION is not an insurance company and UNION does not sell policies of insurance.
3) UNION is not an issuer of CDOs.
4) We are in rapid development phase, and the screens may or may not look like these in final product. Some of the numbers shown are placeholders.
