Fees and the first-loss reserve
HoodStash charges one protocol fee on collected option premium.
The first-loss reserve receives part of that fee. It is limited protection for a defined settlement shortfall. It is not a guarantee.
The fee
The protocol takes 12% of each collected premium.
The fee comes from premium only. It does not come from the stock tokens that you deposit.
If a weekly auction collects no premium, the premium fee is zero.
The fee is taken before the remaining premium is credited to the participating vault shares.
Where the 12% goes
The current policy sends:
- 10 percentage points to the configured protocol recipients; and
- 2 percentage points to the first-loss reserve until the reserve reaches its target.
After the reserve reaches its target, governance can route those 2 points as the contract rules permit.
These are configurable contract values. Read the live contract state before a transaction when the interface shows a newer value.
What the reserve holds
The reserve holds the protocol's dollar token.
Its maximum available protection is its current token balance. A name such as “insurance pool” does not create money beyond that balance.
The reserve starts small and grows from collected premium. A young reserve can be much smaller than the vault value.
What the reserve can pay
The reserve is for a verified settlement shortfall.
An approved payment follows the contract control and delay. One event cannot use more than 30% of the reserve.
The payment can therefore be limited by:
- the reserve balance;
- the per-event contract limit;
- the event definition; and
- the required governance process.
What the reserve does not cover
The reserve does not promise payment for:
- a normal stock-price fall;
- gains missed above the agreed sale price;
- a small or failed auction;
- normal withdrawal waiting time;
- a ticket that expires unused;
- a bad wallet signature;
- every contract defect;
- every token issuer action; or
- every network failure.
The reserve does not guarantee a deposit, share balance, refund, ticket, or return.
Dollar-token issuer risk
The reserve and auction use an outside dollar token.
Its issuer can pause or freeze transfers. If the issuer stops the vault or reserve from sending that token, the protocol cannot force the issuer to resume.
This risk exists even when the HoodStash contracts work as designed.
A simple example
If an auction collects 100 dollar tokens of premium:
- 12 dollar tokens go to the protocol fee;
- 2 of those 12 fund the reserve while it is below target; and
- 88 dollar tokens remain as vault premium before rounding.
This example explains the percentage only. It is not a return forecast.
What to check
Before you deposit:
- Read the current premium fee.
- Read the reserve balance.
- Read the per-event payout limit.
- Check the dollar token used by the vault.
- Decide whether the limited protection is enough for your risk tolerance.
Continue with the depositor guide or read the technical trust model.