[Draft] [Social] IPS Amendment No. 1: Endowment Options Overlay
Summary
This proposal amends the ENS Endowment Investment Policy Statement (IPS v2.0, EP 6.46) to permit covered options writing as part of the Endowment’s scheduled rebalancing, within limits written into the policy.
It relaxes one existing constraint: options written in the direction of a required rebalance are treated as ETH/stablecoin rebalancing under Section 5, not as speculative trading.
This IPS amendment is a policy change only. A separate Permissions Update Request (“PUR #11”) payload will be reviewed by Blockful and moved to execution at the discretion of the ENS Foundation Board, pending a successful review.
Abstract
The Endowment rebalances between ETH and stablecoins on the schedule in IPS Section 7 and executes every rebalance at spot. KPK proposes executing part of that flow through covered options: a covered call when ETH is overweight, a cash-secured put when ETH is underweight. The Endowment collects a premium for committing to a price on a trade it would make anyway. The overlay takes no directional view, and assignment is the intended outcome, not the risk.
The IPS does not permit options today. This proposal adds covered options writing to Allowed Strategies (Section 6), with these limits written into the policy:
- Options cover at most 25% of the total flow a required rebalance needs; the rest trades at spot.
- Written notional, including stablecoin collateral locked for cash-secured puts, is capped at 3% of total Endowment value (2% for Rysk Finance and 1% for MYSO Finance).
- Tenor is at most 30 days, so every position is reversible by expiry.
- Every position is fully covered and physically settled. No naked, margined or leveraged options.
- Two writing tests protect the Minimum Runway: no new option while Total Reserves cover fewer than 42 months of Operating Expenses, and no new cash-secured put whose collateral would take Available Stablecoins below the Minimum Runway.
- Options activity is reported monthly and writing pauses under defined conditions. ENS DAO, or the ENS Foundation Board as delegated steward of the Endowment, may suspend writing at any time.
Relaxation of a prior constraint (IPS Section 3 disclosure)
Section 5 bars speculative trading except ETH/stablecoin rebalancing, and Section 9 defines moderate-risk strategies as non-speculative. This amendment states that covered options written in the direction of a required rebalance are rebalancing for those purposes. No other constraint is relaxed. The Minimum Runway and its priority are unchanged.
The methodology, backtest, venue due diligence and the rationale for each limit are set out in the Expanding the Endowment Mandate: Onchain Options thread. That thread and this post together form KPK’s written rationale under IPS Section 3.
Specification
IPS Options Amendment (adopted by this vote)
The following is inserted as the fifth item under IPS Section 6, Allowed Strategies:
Covered options writing
The Endowment Manager may write covered options against assets the Endowment already holds: covered calls against owned ETH, and cash-secured puts fully funded by stablecoin collateral set aside for that purpose. Positions must be fully covered by owned inventory or set-aside collateral at all times. Options may be written only in the direction of a required rebalance, and may cover no more than 25% of the total ETH or stablecoin flow that rebalance requires; the remainder is executed at spot.A “required rebalance” is the trade needed to return the portfolio to the target allocation in Section 7 or to restore the Minimum Runway in Section 6, as determined by the Endowment Manager under Section 7 and its published methodology; the 25% limit applies to that total flow, not to any single tranche.
Options written under this item are ETH/stablecoin rebalancing for the purposes of Section 5 and are not speculative trading. No naked, margined or leveraged options are permitted. Positions are physically settled.
Limits
This strategy operates only on assets already eligible under this Policy and introduces no new permitted assets. It is a moderate-risk strategy and counts toward the 10% moderate-risk cap in Section 5. Written notional, measured at the strike and including collateral locked for cash-secured puts, may not exceed 3% of total Endowment value at any one time, and 2% per venue. Option tenor may not exceed 30 days, so every position is reversible within 30 days by expiry. Execution is limited to audited, non-custodial, onchain venues on Ethereum mainnet approved by ENS DAO or the Board through a Permissions Update Request.In this item, “the Board” means the Board of the ENS Foundation, which holds the Endowment Safe under the ENS DAO proposal “Next Era of ENS DAO: Empowering the ENS Foundation”, and a “Permissions Update Request” is a change to the Endowment Manager’s Zodiac Roles permissions scheduled by the Board through the Endowment timelock.
Reporting and suspension
Options activity is reported in the monthly report under Section 8: open positions, premium received, assignments, and the cumulative net result against a spot-only rebalance after fees and collateral opportunity cost.The Endowment Manager writes no new options, and notifies ENS DAO or the Board: if that cumulative net result is negative at the end of two consecutive quarters; on any venue incident (exploit, contract pause, failed or delayed settlement, or change to venue contracts or terms); on any oracle incident (halt, material divergence between price sources, or disputed settlement price); or while a writing test below is not met.
ENS DAO by Social Proposal, or the Board as delegated steward of the Endowment under “Next Era of ENS DAO: Empowering the ENS Foundation”, may suspend the strategy at any time, in the Board’s case by written notice to the Endowment Manager. Suspension requires no onchain action; open positions run to expiry. After a pause under this paragraph or a suspension by the Board, writing resumes only on the Board’s written confirmation. After a suspension by ENS DAO, writing resumes only on a vote of ENS DAO.
Writing tests
- (i) No new option is written while Total Reserves cover fewer than 42 months of Operating Expenses.
- (ii) No new cash-secured put is written if, after its collateral is set aside, Available Stablecoins would be less than the Minimum Runway in Section 6 (Liquidity Constraint). Covered calls are not subject to test
- (iii). While the Minimum Runway is not met, any part of a rebalance covered by a call that expires unexercised is executed at spot promptly after expiry.
For these tests: “Operating Expenses” means one thirty-sixth of the Minimum Runway in force (about $1.37M a month on the 2025 reference), so that both tests move with its annual recalculation; “Total Reserves” means the total value of the Endowment, measured as in the monthly report under Section 8, excluding open option positions and premium not yet received, with assets held against a written call valued at the lower of market price and strike, and put collateral counted once; and “Available Stablecoins” means US-dollar stablecoins held by the Endowment (excluding EURC), less collateral locked for open cash-secured puts and any approved withdrawal or transfer not yet executed. Both tests are checked before each new position and at each weekly runway check under Section 5, and are shown in the monthly report. These tests apply only to options writing; nothing in them reduces or amends the Minimum Runway or its priority under Sections 6 and 7.
Effect
This Amendment takes effect when this proposal passes. If there is any inconsistency between the IPS and the Endowment Manager’s options methodology or any other operating document, the IPS prevails.The Endowment Manager and the Foundation publish the consolidated text as IPS v2.1 and pin it to IPFS, making only non-material corrections (numbering, cross-references, typographical errors). The Endowment Manager’s onchain permissions for the approved options venues are granted separately by Permissions Update Request #11 or subsequent PURs and only take effect review and onchain execution.
PUR #11 Notice
If this amendment passes, the ENS Foundation Board may consider PUR #11, which grants the Endowment Manager permissions on the two options venues. PUR #11 goes through the standard KPK and Blockful review before implementation.
- Venues: MYSO Finance (Enzyme) and Rysk Finance, both on Ethereum mainnet. Venue details, audits and settlement mechanics are in the background thread.
- Permissions, payload and simulation: KPK posts these in this thread before the Snapshot opens, as a plain-text list of the role permissions, target contracts and function selectors, with the payload and a Tenderly simulation. Blockful’s review begins on posting.
- Review: Blockful confirms in writing that the payload grants only the permissions listed, for the two venues, on Ethereum mainnet. If the review changes the payload, KPK posts the revised payload in this thread before it is scheduled.
Voting
Single choice:
- For
- Against
- Abstain.
Next steps
- Discussion on this thread for a minimum of 7 days.
- KPK posts the PUR #11 permissions, payload and simulation in this thread in parallel with the discussion.
- Snapshot vote (5 days).
- If the vote passes, covered options writing is permitted under the IPS. Blockful completes its review of PUR #11 and passes it to the Foundation.
- KPK includes options activity in its normal reporting.