Diversify Truefi Treasury For Expenses and for holding some ETH

Proposals
6

Instead of an outright sale of TRU -which could cause selling pressure- one could also do a covered call. This way one could get the same target stablecoin amount by lending TRU tokens rather than selling, helping minimize selling pressure. Moreover, it would also allow to keep TRU token upside.

To be more specific, one could do a covered call with $500k of TRU and with a 120% strike and 180d tenor. This means TrueFi could lend $500k of TRU for 180 days and cap their upside at 120% of the current spot. And in return TrueFi would earn ~$95,000 USDC in upfront premium. Then after 180 days there are two possible outcomes: a) if TRU didn’t increase by more than 20% then TrueFi gets all TRU tokens back. b) if TRU increased by more than 20% then TrueFi receives $600,000 USDC, ie the conversion amount using the 120% strike. The upfront premium of $95,000 USDC is paid either way no matter what. Institutional trading firms are willing to take the other side and pay the premium as they can make money from the volatility of TRU, ie “gamma scalp”, meaning the more volatile TRU is the more often they can sell high and buy low allowing them to capitalize on volatility.

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The above is an example for 180 days and 120% strike, though other combinations are possible too; generally the longer the the tenor the higher the premium and similarly, the lower the strike the higher the premium. Attached is also an example matrix showing indicative premiums across different tenor and strike combinations (these calculations tend to be close to firm tradeable quotes, which we can help receive).

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All of this can be done through MYSO Finance (myso.finance), who work together with instituional trading firms to help get matched in size and provide white glove service to orchestrate the process. What’s unique about MYSO here is that the execution can be done fully onchain, and WITHOUT counterparty risk, and covered call terms are fully customizable and bespoke, there’s no other place one can do this at the moment. MYSO has already been used by several whales and treasuries to get access to fully on-chain settled bespoke covered calls, for example we worked together with Telos, Evmos, DIA, UMA, Enzyme and other. The protocol has also undergone three independent security audits by Statemind, Omniscia and Trail of Bits.

The process to get started would be super simple:

  1. TrueFi creates a non-custodia vault on MYSO app and funds it with TRU
  2. MYSO gets firm quotes from trading firm for given covered call parameterization
  3. TrueFi picks best quote and then creates a matching on-chain quote
  4. Trading firm takes on-chain quote and covered call is done, with TrueFi receiving given upfront premium (in this example $95,000 USDC)

We made a proposal outlining how this can be done a while ago here: Covered Calls for TrueFi Treasury & Whales - #10 by aetienne

We’d love to work on this together with TrueFi and be of value to the team and community.

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