HOT & HDF

Hegic Operational Treasury and Hegic Development Fund

Hegic Operational Treasury (HOT) is used for collateralizing active options/strategies, accumulating premiums paid by buyers, and conducting intramonthly settlement of ITM options/strategies by sending the net P&L to the option/strategy holder when exercised.

The initial liquidity for selling options and strategies will be deposited by the Hegic Development Fund. During the Hegic Hardcore beta testing phase, HDF was the only options/strategies seller to safely test the new version’s functionality and economics.

The total net profits in USDC generated on selling OTM options and options strategies and accumulated in the Hegic Operational Treasury are settled monthly and sent to the Hegic Stake & Cover Pool.

The role of Hegic Development Fund (HDF) is crucial in the first few Epochs of the Stake & Cover way of operating. HDF holds the funds Hegic has collected during IBCO sale of $HEGIC token, and the funds are used to provide support to HOT. As it can be seen on-chain, HDF holds more then 22K of ETH, 83 BTC and 173 million of $HEGIC tokens (above 16% of supply).

Until the liquidity of $HEGIC token on numerous DEX protocols and CEX exchanges is deeper and more dense, the collected $HEGIC tokens from negative Epochs will be sold directly to Hegic Development Fund for a fixed price stated at the begging of Epoch. This way HDF is protecting the market price of $HEGIC, as it's basically conducting a OTC sale with the Treasury.

The capital thats in possession of HDF, along with $HEGIC fixed price per Epoch and number of staked $HEGIC tokens in each Epoch, are crucial risk management factors in determining options liquidity of each Epoch - in other words how many options protocol can sell in each Epoch.