The rules, in full.

COPE Finance

1. Introduction

COPE Finance is a proposed protocol for pooled USDC positions in put options linked to US Treasury assets. A pool collects USDC, buys one specified put option when its public purchase rules are met, sells the option under its public sale rules, and distributes the remaining USDC to pool owners.

The protocol has no discretionary pool manager after pool creation. The proposed contracts apply the pool’s fixed rules for deposits, purchase, sale, and claims. The pool creator sets those rules before deposits open.

The product does not promise a profit or protect deposited capital. A put option can lose all of its value, and pool owners can lose some or all of their deposited USDC.

2. Entities and terms

A pool is one defined options position. Each pool links to one Treasury asset and one option market. The exact Treasury assets and option markets remain pending before launch.

USDC is the deposit asset and the payout asset. A user deposits USDC only while a pool is open for deposits. The pool uses available USDC to buy its selected option after the purchase conditions are met.

The pool creator creates a pool and sets its terms. The creator cannot change the terms after creation and cannot choose the purchase or sale time after creation.

The protocol mints a pool NFT when a creator makes a pool. The pool NFT identifies the pool and its fixed terms.

The protocol mints an ownership NFT for each deposit. An ownership NFT represents a fixed percentage of the pool’s total deposits. The current holder of an ownership NFT holds the related claim right.

3. Treasury put options

A put option gives its buyer the right to take a short futures position at the strike price if the option is exercised. A bought put can gain value when the related Treasury futures price falls.

Treasury prices and yields usually move in opposite directions. A view that Treasury yields will rise is usually a view that Treasury prices and Treasury futures prices will fall.

At expiry, the simplified value of a put option is:

$$ \max(K-F, 0) $$

where $K$ is the strike price and $F$ is the futures settlement price.

For example, a put with a 110.00 strike has no simplified expiry value when futures settle at 110.00 or above. The put has 2.00 points of simplified value when futures settle at 108.00.

An option’s market price also depends on remaining time, implied volatility, and market liquidity. A pool may sell its option before expiry. The sale price can differ from the option’s expiry value.

4. Pool creation

A creator sets every pool term before the pool accepts deposits. The terms are public and immutable after creation.

Each pool defines the following terms:

• The option expiry date.
• The maximum premium the pool may pay to buy the option.
• The minimum premium at which the pool may sell the option.
• The minimum USDC amount required before purchase.
• The final sale time, which occurs before option expiry.

The protocol must also specify the selected Treasury asset, option market, price source, execution method, fee schedule, and transaction-cost treatment before launch. Those terms are not yet fixed in this paper.

5. Deposits and ownership

Users can deposit USDC into an open pool before the pool buys its option. The pool closes deposits after execution, so ownership percentages remain fixed while the pool holds the option.

Each deposit receives a percentage equal to its share of total pool deposits. A deposit of 10 percent of the pool’s total deposits receives an ownership NFT for 10 percent of the pool.

The ownership NFT carries the payout right. If NFT transfers are enabled for a pool, the current NFT holder receives the claim. The protocol must specify whether transfers are enabled and any transfer restrictions before launch.

6. Option purchase

The pool buys its selected option only when the pool reaches its minimum size and the quoted option premium is at or below the pool’s buy limit. Both conditions must occur before the option expires.

The proposed purchase flow is:

1. Users send USDC to the pool before execution.
2. The pool records each deposit percentage and mints the related ownership NFT.
3. The price source reports the quoted option premium.
4. The pool buys the selected option when the deposit and price conditions are met.
5. The pool closes deposits and holds the option until sale.

The pool uses its available USDC for the option purchase. The pool may retain a small USDC balance only for protocol rules or transaction costs. The exact cost rule remains pending.

If the purchase conditions do not occur before option expiry, the pool does not buy an option. Each ownership NFT holder can claim the NFT’s share of the pool’s USDC, less any defined costs.

flowchart TD
    A[Users deposit USDC] --> B[Pool records ownership percentages]
    B --> C[Ownership NFTs]
    B --> D[Pool holds USDC]
    D --> E{Minimum size and buy limit met}
    E -- Yes --> F[Pool buys Treasury-linked put option]
    E -- No before expiry --> G[Owners claim USDC]
    F --> H{Sell limit reached or final sale time}
    H --> I[Pool sells option]
    I --> J[Pool receives USDC proceeds]
    J --> K[Owners claim pro rata USDC]

Figure 1. Proposed pool asset and ownership flow.

7. Option sale and distribution

The pool sells the option when the quoted premium reaches or exceeds the pool’s sell limit. The pool also sells at the final sale time when the sell limit has not been reached.

The final sale time occurs before option expiry. The forced sale rule avoids holding the option to expiry by default.

The proposed sale and claim flow is:

1. The price source reports the option premium after purchase.
2. The pool sends a sale through the selected execution method when the sell limit is met or the final sale time occurs.
3. The execution method settles sale proceeds in USDC, or the protocol converts proceeds to USDC under its defined settlement rule.
4. The protocol deducts its stated fee and defined costs.
5. Each ownership NFT holder claims the NFT’s percentage of the remaining USDC.

For example, an ownership NFT for 10 percent of a pool can claim 10 percent of the remaining USDC after the option sale, fee, and defined costs.

The order type, price rule, response to a failed trade, and response to a partial fill remain pending before launch. A quoted premium does not guarantee a sale at that premium unless the execution method can fill the order at that price.

8. Fees and costs

The protocol charges a fee. The protocol must publish the fee rate and state whether the fee applies to deposits, sale proceeds, or profit before launch.

The product page must show the fee before a user creates or joins a pool. The product page must also show estimated execution costs when the protocol can calculate them.

Transaction costs can reduce the USDC available to buy an option and the USDC available for claims. The protocol must define the treatment of transaction costs, failed trades, and partial fills before launch.

9. Failure, dormancy, and abuse

A pool can fail to buy an option when it does not reach its minimum size or when the option premium stays above the buy limit. In that case, the pool returns claimable USDC to ownership NFT holders under the final cost rule.

The pool closes deposits after purchase. The closed-deposit rule prevents later deposits from changing ownership percentages while the pool holds the option.

The pool sells at the final sale time when the sell limit is not met. The final-sale rule limits the time the pool holds the option and avoids expiry settlement by default.

Incorrect, delayed, or unavailable price data can delay or prevent a purchase or sale. The protocol must define price-source update frequency and its response to unavailable or invalid prices before launch.

The protocol also depends on smart contracts, USDC, the option execution venue, the price source, and settlement services. Each dependency can fail or be attacked. The paper does not claim that any dependency is secure, available, or liquid.

10. Risks and limits

Pool owners take the risk of the option position. The option can lose all of its premium. A Treasury asset can rise, or it can fail to fall enough for the option to gain value.

Time reduces an option’s value as expiry approaches. Implied volatility can fall after purchase and reduce the option’s value even when the related futures price falls slightly.

Option markets can have limited liquidity. A wide bid ask spread can increase entry and exit costs. The market price used for automatic purchase or sale can differ from the expected price.

Treasury futures can move differently from a cash Treasury security because of delivery, financing, and basis effects. An exercised option can create a futures position that requires margin and active management. The protocol’s pre-expiry sale rule reduces but does not remove execution and settlement risk.

Treasury-linked options and pooled investment products can face legal and regulatory limits. Users must check whether they can use the product in their location. COPE Finance is not investment advice, a recommendation, or a substitute for broker or venue documents.

11. COPE tokenomics

COPE has a maximum supply of 1,000,000,000 tokens and uses 18 decimal places. The proposed allocation is:

The locked reserve is unavailable at launch. The protocol must publish the reserve’s purpose, lock method, and unlock schedule before any reserve tokens can enter circulation.

The proposed token contract allows the owner of the canonical deployment to issue tokens within the maximum supply. The contract counts all tokens issued on that deployment against the maximum supply, including tokens later burned or transferred to another chain. Burning tokens does not create room for more issuance.

COPE uses the LayerZero V2 OFT standard for transfers between configured EVM chains. A crosschain transfer burns tokens on the source chain and creates the same amount on the destination chain. Only the canonical deployment can issue new tokens.

12. Required before launch

The following parts of the protocol require a final specification before launch:

• Treasury assets and option markets available to pools.
• Option venue and settlement method.
• Price source, update frequency, and unavailable-price response.
• Order rules for buy and sell limits.
• Fee rate and fee basis.
• NFT transfer rules and restrictions.
• Transaction costs, failed trades, and partial fills.
• Withdrawal and claim process after pool closure.
• Legal jurisdictions and user restrictions.
• Token allocation addresses and custody rules.
• Core contributor vesting terms.
• Uniswap liquidity terms.
• Locked reserve purpose, lock method, and unlock schedule.

The deployed implementation is the final source of truth. The protocol must publish the implementation, current parameters, and applicable legal terms before users create or join a pool.

13. Parameters and disclaimer

This document describes a proposed product. It does not offer securities, derivatives, investment advice, legal advice, tax advice, or a recommendation to transact. Options, futures, USDC, smart contracts, and pooled products involve material risk. A user can lose all funds committed to a pool. Users are responsible for reviewing the final terms, implementation, venue documents, and rules that apply in their jurisdiction.

Sources

• CME Group, 10 Year T-Note Options contract specifications
• CME Group, 5 Year T-Note Options contract specifications
• CME Group, US Treasury Bond Options contract specifications