NOT & NDF

Nexo Options Operational Treasury and Development Fund

Operational Treasury

The Nexo Options Operational Treasury (NOT) is used to:

• Collateralize active options and strategies.

• Accumulate premiums paid by buyers.

• Conduct intramonthly settlement of ITM (in-the-money) options and strategies by sending net P&L to holders when exercised.

The total net profits in USDC.e generated from selling all options and strategies and accumulated in the Operational Treasury are settled monthly and transferred to the Nexo Options Stake & Cover Pool.

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Development Fund

The initial liquidity for selling options and strategies was provided by the Nexo Options Development Fund (NDF). During the beta testing phase, NDF was the sole seller of options and strategies to safely test the new protocol’s functionality and economics.

Until $NEXO token liquidity on DEXs and CEXs becomes deeper and more stable, $NEXO tokens collected from negative Epochs will be sold directly to the Development Fund at a fixed price set at the start of each Epoch. This allows NDF to protect the market price of $NEXO by effectively conducting OTC-style transactions with the Treasury instead of selling on exchanges.

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Risk Management

The capital held by NDF, along with the fixed $NEXO price per Epoch and the total staked $NEXO in each Epoch, are key risk management factors.

These parameters determine the level of options liquidity available each Epoch — in other words, how many options the protocol can safely sell during that period.