Put Selling Vault

1 min read

Pronunciation

[put sel-ing vawlt]

Analogy

Like a landlord renting out the right to buy their property at a set price, earning rent regardless of whether the sale happens.

Definition

A strategy vault that generates yield by selling put options on an underlying asset, earning premiums while taking on downside exposure.

Key Points Intro

Put selling vaults offer automated income generation through options premiums.

Key Points

Premium income: collects option premiums as yield

Collateralized: locks underlying assets as security

Downside risk: liable if market price falls below strike

Automated: vault contracts handle lifecycle and payouts

Example

Ribbon Finance’s ETH put-selling vault sells weekly put options and distributes collected premiums to holders.

Technical Deep Dive

Vault contracts deposit collateral into options protocols (e.g., Opyn). They mint and sell puts at defined strikes and maturities, then handle settlement or collateral assignment. -based workflow automates mint, sell, and settle phases, while governance can adjust parameters.

Security Warning

Severe market downturns can trigger collateral losses and liquidations if asset prices drop significantly.

Caveat

Underperforms in strong bull markets where underlying assets rise far above strike prices.

Related Terms

Covered Call Vault

Collateral Management

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