Risks

Risks of DIPs and Staking Options

What do you mean by UPSIDE vs DOWNSIDE options? Upside DIPs are covered call options and Downside DIPs are protected put options since they are fully collateralized positions. Yield as an option premium is paid to sell the "upside" or "downside" outcomes. Similar for Staking Options, Upside = Calls, Downside = Puts.

Can I withdraw after staking but before expiration? No, DIPs can only be withdrawn after expiration. However, you receive the premium amount upfront upon staking, which can be put to use elsewhere.

What happens to my Staking Option tokens after expiration if they are not exercised? If you choose not to exercise an Staking Option, then the option expires worthless. The Staking Options tokens will remain in your wallet, but they are not exercisable.

What is the worst-case scenario for DIP? The worst-case scenario is that you end up with all stablecoins, effectively selling your tokens at the strike price of the DIP that you deposited in which will happen when the market rallies while deposited.

What is the worst-case scenario for Staking Option? With a staking option, the user is the one holding the option. Either it expires worthless, or the user can exchange tokens at the ratio in the Staking Option. Exercise is physically settled and not automatic. Dual Finance does not make any recommendations on whether you should exercise a Staking Option or not, so always do your own research before exercising any SO and make sure the price makes sense to exercise.

What is the best-case scenario for DIP? The best-case scenario is that you earn the premium immediately from staking into a DIP and the staked asset's price at expiry is just below the strike price.

What is the best-case scenario for Staking Option? The price of the token of the Staking Option you earned rallies, allowing you to exercise to buy the token for the strike price at a discount to the market rate.