Borrowing Against Ribbon Vault Deposits
Capital inefficiency has been the perennial bear argument against DeFi options since early 2020 — and for good reason. Today, we are super excited to introduce the Ribbon Covered Call Fuse Pool — a way for users to borrow stablecoins against their yield-generating covered call position!
What this unlocks
Borrowing against your Ribbon Vault positions creates a whole range of new use-cases. Here are some that we are most excited about:
- Leveraged covered call position. Borrow stables, convert to ETH, and deposit into the same covered call vault to lever up.
- Construct a vertical spread. Borrow stables, convert to ETH, and buy call options on other options platforms.
- Construct a short strangle. Borrow stables and deposit into the Ribbon put-selling vault, effectively selling both a call (through the Ribbon Covered Call vault) and a put.
- Construct a delta neutral position. Borrow stables, long ETH perp or (hint hint) bid on the very same options auction you are selling into and then pocket the $RBN staking rewards from your covered call position!
How this benefits Ribbon
Being able to borrow against your vault positions currently unlocks +$100M from an entirely new DeFi demographic that has been sitting on the sidelines, reluctant to use Ribbon because it is not capital efficient. Users can now deposit into Ribbon, borrow stables, and lend in Maple or lever up on the same covered call vault for higher APY.
How to get started
The first asset we are whitelisting is the rETH-THETA-gauge token. This represents the ETH covered call vault token, staked in Ribbon’s LM contracts. We are whitelisting the “staked” covered call token instead of just the plain covered call token to minimize the opportunity cost in having to choose between staking your vault token or borrowing against it — we let you do both at the same time.
We will be officially launching this feature in the next few weeks. If the fuse pool shows signs of traction with just the ETH covered call vault, we will expand to other vaults.