> For the complete documentation index, see [llms.txt](https://docs.stormbit.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.stormbit.finance/why-stormbit.md).

# Options-Backed Credit

Every Stormbit loan is a collar. At origination — before any USDC moves — a put and a short call are written on the borrower's collateral on Deribit. The put sets a hard floor under the collateral. The short call caps the upside. The net premium funds the loan.

One structure, three consequences:

**0% APR** — The borrower pays no interest. The short call premium funds the loan economics. The cost the borrower carries is the cap: upside above the call strike belongs to the desk for the duration of the term.

**No liquidation** — The floor is an option, not a margin monitor. No matter what the collateral does during the term, there is no liquidation bot, no margin call, no 10-minute price wick that closes the position. The put settles the downside at maturity.

**Endogenous yield** — Lender yield is the premium borrowers' collars generate — priced at trade entry, paid from inside the trade. Not token emissions, not a pass-through of Fed rates.

***

**The spread being underwritten** — BTC implied volatility has averaged 5–8 vol points above realized across past cycles. The desk underwrites that spread loan by loan. It compresses and occasionally inverts — which is why soUSD carries a floor mechanism and the engine publishes its own error rate rather than assuming the spread persists.

**The pricing engine** — A 2D vol skew surface, calibrated weekly against a live OTC quote feed, backtested on 6+ years of Deribit data. Strike selection is adaptive, and the engine's error rate is published cycle over cycle.

***

**Next:** [How It Works](/protocol/how-it-works.md) — the full loan lifecycle, from deposit to settlement.


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