PRINCIPAL RISKConversion of collateral to USDC: If the covered call finishes in the money (i.e. the price of the asset finishes above the strike price of the option), a fraction of the LRT collateral will need to be sold in order to pay off the value of the call on expiry. The key risk to selling covered calls is that asset holders miss out on price appreciation of their asset, beyond the strike price of the option.
SMART CONTRACT RISKInteracting with any smart contract carries the risk of losing access to your funds. The immutable nature of smart contacts makes it difficult and potentially impossible to recover them.
OTHER RISKHolding a Liquid Restaking Token (LRT) carries its own set of risks, including but not limited to smart contract bugs, Ethereum bugs, restaking penalties, price fluctuations and key management problems. If options expire in-the-money, LRT collateral will need to be swapped for USDC on settlement. Available LRT spot liquidity on the exchange and the amount of LRT collateral to be liquidated could factor in to longer settlement times, in order to ensure quality of execution. Learn more
