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Understanding Metavaults

The Metavaults, and how they hedge downside or amplify upside for LPs.
Example Metavaults UI
Metavaults allow users to provide liquidity while also automagically hedging or slightly levering price action on underlying assets. Jones Metavaults take being an LP to the next level.

How do they work?

  • Users can provide LP tokens (currently rDPX-WETH or DPX-WETH) and deposit them in a Metavault.
  • The Metavault stakes the LP token in Dopex farms, generating yield in DPX and rDPX tokens.
    • 50% of this yield is autocompounded into the LP farm.
    • 50% of this yield is used to buy options:
      • In the Bull Metavault, this portion of LP yield is used to purchase calls.
      • In the Bear Metavault, this portion of LP yield is used to purchase puts. Profits from options bought are compounded into the LP position.
  • Users can deposit anytime during ongoing 1-week epochs.
  • Flip: This feature allows users to switch from Bull to Bear or vice versa in the middle of an epoch, with the change taking effect automatically next epoch. Users can use Flip to adjust the bias of their Metavault position.
  • Users can signal to exit the metavaults at any time. Funds will be automatically unlocked and claimable at the end of the current epoch.

Benefits

  • Bull Metavault: Stake LP token in Dopex farms, buy calls with 50% of the weekly yield earned. If the LP assets appreciate in price, the calls can be in profit, generating more yield overall and amplifying the upside.
  • Bear Metavault: Stake LP token in Dopex farms, buy puts with 50% of the weekly yield earned. If the LP assets depreciate in price, the puts can be in profit, partially protecting the downside of the position.
  • Flip: Swap between Bull and Bear Metavaults automatically, with the change taking place next epoch. Allows the user to adapt their position to market conditions.
  • Reduced impact of impermanent loss due to price fluctuations in LP assets.

Options Exposure

  • 50% of weekly yield generated by staking LP tokens is used to purchase options. At a 24% APR from staking the underlying LP tokens, the weekly options bought account for ~0.24% of Metavault TVL.
  • This ensures the Metavaults are risk-managed with suitable and safe options exposure. As this exposure comes from the yield generated by the underlying positions, the Metavaults are principle protected.

Use Cases

  • In an uptrend in the price of LP assets, a Bull Metavault would perform far better than a naked LP position. In a downtrend in the price of LP assets, a Bear Metavault would perform far better than a naked LP position.
  • Users can both farm lucrative LP yields for blue chip ecosystem tokens like $DPX and $rDPX, while having smart exposure or protection as they would like.
  • Enhance LP positions with real yield from options PnL.

Fees

  • For automatically farming, compounding, and purchasing options, Jones collects a total of 10% of all yield generated by the Metavaults as fees.