# How it works

**Put mathematical formula into real action**

* Using the Black-Scholes model, we price a 2-Week At-the-money ETHUSD long straddle structure at Vault initiation, considering the latest ETHUSD spot price, strike price, implied volatility, and interest rate.
* At each delta hedging period, we gather the latest ETHUSD spot price and volatility to recalculate the straddle's delta, determining the "delta-to-hedge." We then execute buy or sell hedging orders using ETHUSDT perpetual contracts on Perpetual Protocol v2 (ETH Layer 2 Optimistic network).
* This process repeats for each hedge rebalance period until the vault's expiration date, which is two weeks. At that point, we close all open hedging positions
* Vault users stake USDC to receive a similar payoff to that of a Long Straddle on ETHUSD at the end of the vault settlement, benefiting from ETHUSD's volatile price movements during the period.

<figure><img src="https://3743235123-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FVKu7chbwQOiI6pbRZ5xG%2Fuploads%2FK95W2HWkCtRagv5I8iTL%2Fimage.png?alt=media&#x26;token=fd017e2e-669e-4d82-9efb-874b26109b20" alt=""><figcaption><p>ETH Volatility is at its low<br>Source: Bloomberg</p></figcaption></figure>

**Vault Fee Structure:**

* 10% fee applied on profits earned from the vault, designed to align our interests with users
* No fees applied if vault does not generate profit

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[**optionvault.dvol.finance**](https://optionvault.dvol.finance/)