Winding Down of Alt Option Strategies

Stake DAO exists to provide only the market’s most advanced and highest performing strategies. Unfortunately, our UNI, LINK, and AAVE Covered Call Strategies have not met this standard, and thus, we have decided to reimburse users for gas costs and fees taken, then proceed to close these vaults.

The following is an explanation as to how this happened, our intentions in launching the vaults, and what we plan to do to make sure that our community is taken care of.

When we originally planned to launch our ALT covered-call vaults, we fully believed that there would be significantly higher demand from users. This did not play out as expected, as we saw that 2 out of 4 vaults fell short from reaching their caps, and the AAVE vault was unable to achieve more than a few hundred AAVE in deposits. The SUSHI vault did not receive any deposits, so we made the decision to close it a few weeks after launch.

How this happened & what’s next

Prior to building out these strategies, market makers assured us that they would be happy to trade options on UNI, AAVE, LINK, and SUSHI — unfortunately after launch, the market makers showed far less interest. This lack of interest drove the option prices down — as far as 10x lower than other options on the market — resulting in very bad risk ratios for our users.

Finally, these vaults required a substantial amount of weekly maintenance, which were beginning to eat away at the team’s time and create a labour-cost blow-out for the DAO (not mentioning the high gas costs incurred).

It is for the reasons noted above that we have made the decision to wind down these vaults and reimburse any users that may be at a loss. To do so, we will be blocking new entry to the strategies, sending back all overpaid performance fees, and creating a “gas subsidy” button for users to redeem gas fees. For now, any users with assets deposited in any of these strategies is to withdraw assets from the vaults (open since Friday), we will then communicate in full detail about the process for refunds.

We are as disappointed about this outcome, but do not believe that keeping these options alive in hope of things improving is the right thing to do.

We will continue to prepare the reimbursements and keep our users updated via our community channels.

Regards,
Stake DAO Core Contributors

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