> For the complete documentation index, see [llms.txt](https://docs.dvol.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.dvol.finance/smart-vaults-beta/eth-vol-bull-vault/how-it-works.md).

# 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="/files/tLfBlP4p0G6lndnzUwPP" 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

**Subscribe now at**\
[**optionvault.dvol.finance**](https://optionvault.dvol.finance/)


---

# Agent Instructions
This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com.

## Querying This Documentation
If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter:

```
GET https://docs.dvol.finance/smart-vaults-beta/eth-vol-bull-vault/how-it-works.md?ask=<question>&goal=<endgoal>
```

`ask` is the immediate question: it should be specific, self-contained, and written in natural language.
`goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal.

The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.