How Does a DAO Treasury Use Cryptocurrency Options for Risk Management?
A DAO treasury uses options for hedging against market volatility or generating yield. By purchasing put options, the DAO can secure a minimum sale price for its crypto holdings, protecting against a sharp decline in value.
Conversely, selling covered call options generates premium income on assets the DAO intends to hold, effectively lowering its cost basis and funding operations. This strategy limits upside potential in exchange for immediate, low-risk revenue.
Glossar
Decentralized Finance
Architecture ⎊ Decentralized Finance, within the cryptocurrency ecosystem, represents a paradigm shift in financial infrastructure, moving away from centralized intermediaries towards peer-to-peer systems leveraging blockchain technology.
Dao Treasury
Control ⎊ Dao Treasury refers to the pool of assets, often composed of protocol fees, native tokens, or various cryptocurrencies, managed collectively by the decentralized autonomous organization through on-chain voting.
Covered Call Options
Strategy ⎊ The covered call option strategy involves holding a long position in an underlying asset, such as a cryptocurrency, while simultaneously selling a call option on that same asset.
DAO Treasury Use
Allocation ⎊ DAO Treasury Use represents the strategic deployment of capital held by a decentralized autonomous organization, functioning as a core mechanism for protocol development and ecosystem growth.
Premium Income
Yield ⎊ The premium income, within cryptocurrency derivatives, fundamentally represents the excess return realized from an options strategy relative to a risk-free benchmark, often assessed over a defined holding period.
Cryptocurrency Options
Stewardship ⎊ Involves the responsible structuring of these contracts to facilitate the financing of tokenized assets with verifiable sustainability metrics.