> For the complete documentation index, see [llms.txt](https://docs.ethstrat.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.ethstrat.xyz/tokenomics/otc-options-trade.md).

# OTC Options Trade

A two-year OTC options package that added 2,520 ETH of treasury exposure.

**Status:** Executed

## Overview

ETH Strategy executed a two-year OTC options trade to increase the protocol’s ETH exposure on fixed terms.

The structure provided $5.46 million in gross financing. After a 10% upfront fee, $4.914 million went into 2,520 ETH at a reference price of $1,950.

At execution, this increased:

* Gross ETH exposure from 4,400 ETH to 6,920 ETH
* Treasury leverage from approximately 1.37x to 2.25x
* Gross exposure per 10,000 STRAT from 1.11 ETH to approximately 1.74 ETH

## Trade Terms

| Term                    | Executed Position   |
| ----------------------- | ------------------- |
| Term                    | 2 years             |
| Gross financing         | $5.46 million       |
| Upfront fee             | $546,000            |
| Net capital deployed    | $4.914 million      |
| ETH acquired            | 2,520 ETH           |
| Financing interest      | 0%                  |
| Put position            | 4,000 ETH at $1,365 |
| Call position           | 2,800 ETH at $2,730 |
| Bundled options premium | $0                  |

The put strike of $1,365 sat 30% below the reference ETH price. The $2,730 call strike sat 40% above it.

A $0 bundled premium means the quoted values of the option legs offset each other. The trade was not costless; it included a $546,000 upfront fee.

## How It Works

There are three parts to the structure:

* **Financing:** $5.46 million for two years, with no recurring interest.
* **ETH purchase:** after the upfront fee, $4.914 million was used to acquire 2,520 ETH.
* **Options:** ETH Strategy holds puts on 4,000 ETH at $1,365 and is short calls on 2,800 ETH at $2,730.

Below $1,365, the puts offset part of a wider treasury decline. Above $2,730, the short calls surrender some of the treasury’s additional upside.

Between the two strikes, the acquired ETH drives most of the trade’s outcome.

## Impact on STRAT

STRAT is the equity layer of the ETH Strategy treasury. Financing obligations rank ahead of that equity, so changes in treasury value can have a larger effect on STRAT holders.

| Metric                          | Before    | After     |
| ------------------------------- | --------- | --------- |
| Gross ETH exposure              | 4,400 ETH | 6,920 ETH |
| Treasury leverage               | 1.37x     | 2.25x     |
| Gross exposure per 10,000 STRAT | 1.11 ETH  | 1.74 ETH  |

These figures show gross exposure at execution. They are not guaranteed redemption values, NAV floors or expected returns.

## Risks and Trade-Offs

* **Amplified ETH risk.** Greater leverage increases potential gains and losses for STRAT holders.
* **Partial upside surrender.** Short calls reduce incremental upside above the $2,730 strike.
* **Limited downside protection.** The puts prevent liquidation during the two-year term but do not protect against losses after it ends.
* **Counterparty risk.** The trade relies on each OTC counterparty meeting its contractual obligations. STS Digital was chosen as a counterparty after evaluating many major OTC desks.
* **Fixed-term risk.** Exiting or restructuring before the two-year expiry may be difficult or expensive.
* **Valuation risk.** The position’s value moves with ETH price, volatility, interest rates and time to expiry.

## What This Means

The trade adds 2,520 ETH of immediate exposure and raises treasury leverage to about 2.25x, without recurring interest payments.

The trade-off is a $546,000 upfront fee, less upside above the call strike, and greater market, counterparty and fixed-term risk.