Price protection as a product¶

In one paragraph

PUTGO sells one very specific thing: a minimum selling price, valid for 7 days, for a given amount of an asset you hold. The official price at the moment you buy, multiplied by the market's floor ratio (95% for NVDA, 90% for UNI), is the floor price. At expiry the official price is read exactly once: if it is at or below the floor, your asset is sold at the floor for USDG; otherwise the asset comes back as it is. The premium is paid in the protected asset and taken once, at purchase. Your counterparty is not a person but the market's Money Pool, which reserves every USDG needed for delivery at the instant you buy. This page explains the structure of that product, the shape of the buyer's payoff, who pays whom, and how it compares with a listed put option.

What a floor is¶

The floor price is a number written into your position that does not change for the 7 days that follow. Two things determine it: the official price at the moment of purchase, and the market's fixed floor ratio.

Floor price = official price at purchase × floor ratio, rounded down to the price tick

The floor ratio is 95% in the NVDA market and 90% in the UNI market. The price tick is listed on Markets and parameters.

Some direct consequences:

The floor is always below the purchase price. The ratio is below 100%, and rounding down only pushes the floor lower. You can never buy protection that "cannot lose"; the first 5% or 10% of any fall is yours to carry. That is part of the product, not a defect.
You do not pick a strike. Each market has exactly one floor ratio. That is the precondition for pooling: only when every position in a market has the same shape can one shared USDG pool price all of them with one curve and express its remaining capacity as one number.
The floor moves with the moment of purchase, then stays put. Two people who buy in the same market at different moments get different floors. Once you have bought, the floor does not move however the official price moves.

The buyer's payoff¶

Three amounts to keep apart:

Amount	Meaning
Deposited amount	The amount of the asset you transfer into the contract
Premium	The part taken out of the deposited amount, in the asset, rounded up
Protected amount	Deposited amount − premium: the amount that actually has the floor

Protection covers the protected amount, not the deposited amount. The page shows this number before you confirm; treat it as the one that counts.

At expiry, the value of the position depends only on the official price at the settlement time, \(S_T\), and the floor price, \(K\):

\[ \text{value at expiry} = \text{protected amount} \times \max(S_T,\ K) \]

In words: if the official price is above the floor you get the asset back, worth whatever the price is at that time; if the official price is at or below the floor you receive USDG at the floor. You get the larger of the two, so protection pins the lower bound of your asset's value at protected amount × floor price while leaving the upside untouched.

The premium is not in that formula. It was paid at purchase and plays no part in any later settlement. So the complete account from purchase to expiry is: you pay a premium and receive a position whose downside is pinned and whose upside is uncapped.

NVDA example (illustrative)

Price at purchase 220 USDG, floor 209 USDG, deposit 10 NVDA, premium rate 0.80% at 0% utilization, premium 0.08 NVDA, protected amount 9.92 NVDA.

Official price at expiry	Outcome	You receive	Value of 9.92 NVDA without protection
180	Delivery	2,073.28 USDG	1,785.60 USDG
198	Delivery	2,073.28 USDG	1,964.16 USDG
209	Delivery (exactly at the floor counts as delivery)	2,073.28 USDG	2,073.28 USDG
209.0001	Release	9.92 NVDA	slightly more than 2,073.28 USDG
231	Release	9.92 NVDA, worth about 2,291.52 USDG	2,291.52 USDG

The deeper the price falls below the floor, the more the protection is worth; above the floor the protection does nothing, and what you paid is the 0.08 NVDA at purchase.

An official price exactly at the floor is treated as delivery: you receive USDG equal to the asset's market value at that moment.

Who pays whom¶

There are only two kinds of participant in PUTGO: protection buyers and the depositors in the Money Pool. Money moves differently at purchase, during the week, and at expiry.

flowchart LR
    B[Protection buyer] -- "Purchase: deposit the asset" --> C[Position]
    C -- "Protocol share of the premium" --> T[Protocol treasury]
    C -- "Rest of the premium, released second by second over the tenor" --> P[Money Pool]
    P -- "At purchase: reserve protected amount × floor in USDG" --> R[Reserved USDG]
    R -- "Delivery at expiry: USDG paid to the buyer" --> B
    C -- "Delivery at expiry: asset to the pool, credited to depositors by share" --> P
    R -- "Release at expiry: reservation freed" --> P
    C -- "Release at expiry: asset returned" --> B

At purchase. You deposit the asset. The premium is taken out immediately: the protocol share goes to the protocol treasury (its ratio is listed on Markets and parameters); the rest belongs to the market's Money Pool, but it does not arrive at once. It is released linearly, second by second, from purchase to expiry. At the same instant the Money Pool marks protected amount × floor price of USDG as reserved, rounded up. Reserved USDG cannot be withdrawn and cannot be used for any other position. If the pool's unreserved USDG is not enough for the reservation, the purchase is refused and the page shows the remaining capacity.

During the week. You may exit at any time: the asset is returned immediately, the reservation is freed immediately, the premium is not refunded, and the part of the premium not yet released goes to the pool at once. See Design notes.

At expiry. Delivery: the pool pays the reserved USDG to you, and your asset goes to the pool, credited to each depositor by share. Release: the reservation is freed and the asset is returned to you. In neither case is there a delivery fee or any other fee.

The depositor's side of the accounts is covered in Money Pool economics. Only one thing needs remembering here: every protection has its full delivery USDG set aside at the moment it is bought. The pool never raises the money later and never dilutes a protection.

Pooled protection versus listed put options¶

Economically, a protection with floor \(K\) plus the asset you hold is worth the same at expiry as "the asset plus a put option struck at \(K\)": both are \(\max(S_T, K)\). The differences are in how it trades, not in the shape of the payoff.

	PUTGO protection	Listed put option
Counterparty	The market's Money Pool, all depositors together by share	A specific seller, intermediated by a clearing house
Strike	Fixed at 95% (NVDA) or 90% (UNI) of the purchase price; not selectable	A chain of strikes, your choice
Expiry	The first 12:00 UTC after 7 full days from purchase, so 7 to 8 days in practice	Standardized expiry dates
Pricing	One public utilization curve; the fuller the pool, the dearer	Order book or market-maker quotes, with a bid-ask spread
Premium currency	The protected asset itself	Cash
Exercise	Automatic: delivery whenever the settlement price is at or below the floor	The holder exercises, or an auto-exercise rule applies
Collateral	Full: USDG reserved at the floor when you buy	The seller posts partial margin under margin rules
Early exit	Asset returned, premium not refunded	Sell the option at its market price, including remaining time value
Partial fills	None: full amount or refused	Possible
Resale	No secondary market; a position cannot be sold on	Can be sold on a secondary market

Three of these differences deserve their own paragraph.

No remaining time value. When you sell a listed option early, you recover its remaining time value. PUTGO has no secondary market; an early exit returns the asset and does not refund the premium. In exchange the tenor is one week and the premium is correspondingly small. The reasoning is in Design notes.

Collateral is full. A listed option's seller performs through margin and a clearing house. PUTGO's Money Pool locks every USDG the delivery needs at the instant you buy; performance does not depend on anyone topping up funds later. The cost is a capacity limit: the unreserved USDG in the pool decides how much more protection can be sold.

Exercise is automatic. You make no decision on expiry day. The official price is read once at the settlement time and the rule decides the outcome; nobody, the PUTGO team included, can choose it. See How settlement works.

Why the premium is paid in the protected asset¶

The premium is taken out of the asset you deposit rather than charged separately in USDG. There are four reasons for this choice.

You already hold that asset. Someone who wants to protect NVDA does not necessarily hold USDG. With a single token, one approval and one transaction complete the purchase.
What depositors earn and what they risk are the same asset. Depositors back NVDA protection and receive NVDA on delivery; the premium is paid in NVDA too, so both streams are one asset and the accounts stay legible. Depositors can claim the asset they have received at any time and decide for themselves whether to hold or convert it.
"Protected amount" becomes an honest number. After the premium is taken out, what remains is what is protected. There is no room to advertise "10 protected" when only 9.92 are.
The USDG principal stays clean. Money Pool shares are accounted purely in USDG; premium and delivered assets are tracked separately, so a depositor's USDG principal is never blurred by the price of another asset.

One direct consequence: the USDG value of the premium moves with the asset's price. In the example, 0.08 NVDA is worth about 17.60 USDG at the purchase price of 220; if NVDA is at 231 a week later, the same 0.08 NVDA is worth about 18.48 USDG. The premium rate is a proportion of the amount, not a fixed sum in USDG.

Why there is no order book¶

An order book needs a buyer and a seller to meet at the same strike, the same expiry and the same size. For a new asset in a new market that hardly ever happens: the book is thin, spreads are wide, fills are partial, and when nobody has posted an order there is nothing to buy at all.

PUTGO replaces the order book with two numbers:

Remaining capacity: the pool's unreserved USDG divided by the floor price, which is how much protection can still be bought right now. It is one number, not a stack of orders.
Current rate: utilization sets the rate along one public curve, and anyone computing it at any moment gets the same answer.

So every purchase either fills in full or is refused with the remaining capacity shown. There are no partial fills, no slippage negotiations, and no waiting for someone to sell.

The design also gives things up, and they should be stated plainly:

The rate never falls below the start of the curve. Even when the pool is completely idle, nobody can "offer a lower price".
Capacity is set by the depositors' USDG and has a cap (see Markets and parameters). Under heavy demand the rate climbs along the curve until purchases stop at 100% utilization.

How the rate moves with utilization is in How the premium is priced; where capacity comes from and how it gets used is in Money Pool economics.

Worked examples¶

All figures are illustrative; the parameters that apply are the ones currently published on Markets and parameters.

NVDA: from purchase to expiry¶

Official price at purchase 220 USDG, utilization 0%, premium rate 0.80%. You deposit 10 NVDA.

Floor price      = 220 × 95% = 209 USDG
Premium          = 10 × 0.80% = 0.08 NVDA
Protected amount = 10 − 0.08 = 9.92 NVDA
Pool reservation = 9.92 × 209 = 2,073.28 USDG

Price at expiry 198 (delivery). You receive 2,073.28 USDG. Without protection 9.92 NVDA would be worth 1,964.16 USDG, so the protection gave you 109.12 USDG more.

Price at expiry 231 (release). You get 9.92 NVDA back, worth about 2,291.52 USDG. Had you never bought protection, 10 NVDA would be worth 2,310 USDG. The week of protection cost you 0.08 NVDA, about 18.48 USDG at 231, in exchange for a floor of 2,073.28 USDG for the week.

Early exit on day 3. 9.92 NVDA is returned immediately, protection ends, and the 0.08 NVDA premium is not refunded.

UNI: a wider floor¶

Official price at purchase 10 USDG, utilization 0%, premium rate 2.0%. You deposit 1,000 UNI.

Floor price      = 10 × 90% = 9 USDG
Premium          = 1,000 × 2.0% = 20 UNI
Protected amount = 980 UNI
Pool reservation = 980 × 9 = 8,820 USDG

Price at expiry 8 (delivery). You receive 8,820 USDG; without protection 980 UNI would be worth 7,840 USDG.

Price at expiry 11 (release). You get 980 UNI back.

UNI has a lower floor ratio and a higher premium rate. The floor ratio is a fixed parameter of each market, set per market rather than derived from volatility; the height of the premium curve is recalibrated from volatility every week, so the more volatile asset is dearer to protect. The floor sits further from the current price, so the first 10% you carry yourself is larger; at the same time a fall of more than 10% within a week is more likely, so the premium is dearer. How the curve is set from volatility is in Volatility, fair premium and weekly recalibration.

Key takeaways¶

Floor price = official price at purchase × floor ratio (95% NVDA, 90% UNI), rounded down, fixed after purchase, always below the purchase price.
Protection covers the protected amount = deposited amount − premium. The number shown on the page is the one that counts.
Value at expiry = protected amount × max(settlement price, floor price): the downside is pinned, the upside is uncapped. Exactly at the floor counts as delivery.
The premium is paid in the protected asset, taken once at purchase, and not refunded; the protocol share goes to the treasury and the rest is released second by second to the Money Pool.
The counterparty is the Money Pool, which reserves every USDG needed for delivery at the instant you buy; protection is always for the full amount and never diluted.
Same payoff shape as a listed put, but no strike choice, no secondary market, no remaining time value; full collateral, automatic exercise, and no order book: a purchase either fills in full or is refused.