[Proposal] Launch Asset Vault and Implement Option Trading Strategy for TRU Tokens

Introduction

Rising crypto prices, including TRU, have increased demand and pricing for crypto options. This presents an opportunity for the Truefi DAO to generate revenue by selling call options on a portion of its treasury TRU tokens to Bastion Trading. Selling call options would:

  1. Generate option premium revenue if options are not exercised.
  2. Generate stablecoin proceeds from selling TRU at higher strike prices if options are exercised.

Bastion Trading Background

  • Bastion Trading has been trading cryptocurrencies since 2017 across various CEX and DEX platforms, as a proprietary trader and market maker. Bastion Trading is no stranger to Truefi being one of the first borrowers on the Truefi platform starting in 2021.

  • Currently, Bastion’s co-founder, Masahide Hoshi, is running for election for the Truefi Foundation board directorship having served as an interim director for about the past 18 months.

Proposal

Truefi DAO would sell the following Bastion Trading covered call options, collateralized by TRU tokens:

  • 30-day call options struck 25% above market on 2 million TRU tokens. Bastion would pay a TBD premium in USDC to Truefi DAO treasury.
  • 30-day call options struck 35% above market on 3 million TRU tokens. Bastion would pay a TBD premium in USDC to Truefi DAO treasury.

If exercised, Bastion pays a strike price in USDC to receive the TRU collateral. If not exercised, collateral is returned to Truefi DAO.

This utilizes less than 2.5% of the DAO’s 200 million+ TRU treasury tokens. Truefi DAO and Bastion can trade additional options series over time if mutually beneficial.

As these options expire, Truefi DAO and Bastion can look to trade another series of options to continue this program if preferred.

Further notes

Bastion would most prefer to engage with TruefiDAO/Wallfacer Labs to construct a trustless option vault to hold the TRU collateral that may be able to be used in conjunction with some future expanded business applications. In the meantime, an OTC option with Bastion (with collateral with Bastion), is hopefully acceptable by the community.

For the sizing of option trades versus the Truefi treasury TRU holdings, the treasury currently own more than 200 million TRU. These proposed trades would constitute less than 2.5% of the treasury holdings of TRU (and less than 0.6% of the outstanding TRU tokens).

10 Likes

Thank you @BastionTradingGroup for this excellent proposal! I’m significantly in favor.

  1. I’ve known Masa and the Bastion team for quite a while and think they are a high-quality counterparty for the DAO to have.
  2. I think a covered call option writing strategy as proposed here makes a lot of sense for TrueFi DAO because it can generate yield if TRU price is flat or decreases, and then results in selling some TRU token if TRU price increases above the strike price.

I would love to see this strategy get started at small size (as proposed) and then expanded if as a community we like the results for the DAO.

5 Likes

Thank you @rafaelcosman for your support. We have been long time supporters of the TrueFi team and look forward to keep building on our relationship.

1 Like

I’m for the Proposal. Having multiple market makers can create a strong competitive environment for TRU’s price discovery. Additionally, @BastionTradingGroup has had a strong background in supporting multiple high-profile DAOs with their token liquidity.

It’s always great when market makers have long-term alignment with the success of the community that they are serving and furthermore are actively involved in the governance too.

I’m interested in hearing further applications of the treasury for other financial applications in future Proposals. TrueFi DAO currently has a strong business and software development angle, so it’s great to see more Proposals regarding DAO Treasury Management.

I appreciate you addressing the custodial risk regarding custody of the tokens, and in the future, having trustless management would be ideal.

A few questions:

  • What are the projected stablecoin proceeds if the options are exercised?
  • What is the proposed length of time that you are seeking to engage in market-making activities?
  • Will you provide a report on the activities afterward?
1 Like

I agree with this proposal; it allows for the optimisation of the DAO treasurer’s use of $TRU.

3 Likes

Hi @vandynathan , thank you for your support.

We’d like to clarify that our proposal is not primarily focused on market making, Bastion will commit to paying a premium for these options. However, to your point, as a natural consequence of our delta-neutral hedging Bastion will incidentally engage in market-making activities. This will be reflected through the stacking of lower bids and higher offers, enhancing price discovery for TRU and adding depth and stability to the market.

We also share your enthusiasm for exploring additional DAO Treasury Management solutions and will discuss more applications in future proposals.

On your last point, trustless management of tokens remains a key focus, and we are actively exploring solutions to mitigate custodial risks.

1 Like

Dear TrueFi Community,

We’re glad to see your support and hope to have successfully clarified all aspects of our proposal.
We are ready to move this proposal to an on-chain vote and to start deploying the option strategy.

Bastion requests a transfer of 5M TRU tokens to the following address: 0xc4495c17ebD39d4EBD30ecE087721EA4682650b1

Thank you for your help in creating the on-chain voting proposal on our behalf!

2 Likes

The proposal has been published in Tally (link) and going to be live in 2 days.