TLDR
The BULL Strategy gives holders of yield-bearing assets (e.g., sUSDe and weETH) extra upside exposure to ETH without risking any of their initial capital.
If the ETH price increases by $100 or more in a week, holders can earn yields of up to 2.5x higher than the yield native to their asset.
If the ETH price remains stable, holders receive similar yields to the yield native to their asset.
If the ETH price declines by $100 or more, holders receive no yield for the week.
The strategy buys bull call spreads that are ‘around the money’ with the yield generated by the asset in the previous week. This gives users leveraged exposure to ETH on their yields.
The strategy performs best in a bull market, and outperforms in particular when the market grinds up.
The BULL Strategy is principal protected.
Supported Yield-Bearing Assets
The BULL Strategy currently supports the following yield-bearing assets as collateral:
sUSDe | Uses the native Ethena yield from the previous week to buy the bull call spreads. |
weETH | Uses the native staking yield from the previous week to buy the bull call spreads. |
Who should deposit?
This strategy is best suited to holders of these supported yield-bearing assets who are bullish ETH.
They will outperform and earn more yield during bull markets.
They will underperform and earn less/no yield during a bear market.
It is also suited to those who want (extra) upside exposure to ETH without risking any downside.
The most you can lose is the amount paid for the call spreads, which comes from the yield native to the asset.
What are the risks?
The key risk of this strategy is that you earn no yield on your asset if the market grinds down - that’s it!
What is a bull call spread?
A bull call spread is a simple trading strategy with two components:
A long call with strike K1
A short call with a strike K2 that is greater than K1
The maximum payout for a bull call spread is the difference between the two strikes (K2 - K1), which occurs when the price of the asset is at or above K2 on expiry.
The call spread expires worthless if the price of the asset is below K1 on expiry.
Example
You have $10,000 sUSDe earning 17% APY ($33.70 a week).
ETH = $3,500
K1 = $3,400
K2 = $3,600
Time to expiry: 7 days
In this example, the ETH 3,400 call is trading at $165, and the 3,600 call is trading at $70.
The sUSDeBULL strategy would buy 0.35x 3,400/3,600 call spreads which pay out if ETH rallies 3%+ in a week, and are roughly flat if ETH doesn’t move.
The cost of the call spread is $165 - $70 = $95.
The maximum the call spread can be worth on expiry is K2 - K1 = $3,600 - $3,400 = $200, which occurs when ETH is trading at $3,600 or higher.
The $3,400 and $3,600 calls are both worthless if ETH is below $3,400 on expiry.
If ETH is flat for the week and expires at $3,500, the call spread is worth $3,500 - $3,400 = $100, and the strategy makes a small profit of $5.
ETH Price (end of week) | sUSDe Remaining (end of week) | Ethena Yield | Call Spread Return | Strategy Return | APY |
>$3,600 | 10,000 | 33.7 | 35 | $68.7 | 42.7% |
$3,500 | 10,000 | 33.7 | 1.5 | $35.2 | 20% |
≤$3,400 | 10,000 | 33.7 | -33.7 | $0 | 0% |