Gap cover

GapCover sells cover against a Stock Token's fall over a market closure, paid in USDG, and is an ERC-4626 vault over USDG for the writers who back it. A cover pays its notional times the fall of the asset's price from the closure's reference to its reopening price, beyond a deductible and up to a limit. Weekend gap cover explains the idea. This page is the contract's reference.

Buy cover#

Cover is sold from the moment the band's session shows a coming close until the sales end. Quote the layer, then buy with a ceiling on the premium.

import { gapCover } from '@tapehouse/sdk'

const sale = await gapCover.sales(publicClient, deployments)
const minimum = await gapCover.minDeductible(publicClient, deployments, 'TSLA')

const layer = { notional: 1_000_000_000n, deductibleBps: minimum, limitBps: minimum + 1_000n }
const { premium } = await gapCover.quote(publicClient, deployments, 'TSLA', layer)

await wallet.writeContract(
  gapCover.buy(deployments, { asset: 'TSLA', ...layer, maxPremium: premium + premium / 100n, holder: wallet.account.address }),
)

sales returns undefined while no cover is sold. notional is in USDG units (6 decimals), so the layer above covers 1,000 USDG. The caller pays the premium in USDG, so approve USDG to the cover first. Each purchase is its own cover, held by holder, and is not transferable. After the series settles, gapCover.release credits the payout and gapCover.claim sends it:

await wallet.writeContract(gapCover.release(deployments, id))
await wallet.writeContract(gapCover.claim(deployments, wallet.account.address))

gapCover.holdings lists the covers an address holds, and gapCover.payout computes what a settled series pays a layer.

Functions#

Reads#

The SDK reads are gapCover.quote, minDeductible, pricingGap, capacity, lastCloseMs, sales, series, cover, holdings, payouts, writers and writer.

What a cover pays#

The cover pays notional times the fall from the reference to the reopening price, beyond deductibleBps and up to limitBps, in basis points of the reference price: a layer, as reinsurance writes one. A rise pays nothing. The price is the Stock Token's, as the band and its Chainlink feed quote it, so a dividend or split pays nothing by itself. The cover is settled in USDG and needs no token held. A payout is capped by the writers' USDG at release.

A valid layer has a deductible of at least minDeductible, a limit above the deductible, and a limit of at most 10,000 basis points. Otherwise buy reverts with InvalidLayer, which carries the minimum.

When it is sold. From the moment the band's session shows the coming close, on the last trading day before a weekend or holiday, until that close. Where the band's Chainlink feeds follow NYSE's regular hours (regularHours), the sales end at the regular close and the reopening is the regular open. Never while the band is halted for the asset, a multiplier change is pending, or the sequencer is not settled.

Pricing#

The premium is the layer's expected payout under a fitted tail, in closed form, plus LOADING_BPS (50%), rounded up. The tail is a generalized Pareto of shape one half, fitted to ten years of the launch assets' weekend falls, and scaled to the period the cover pays.

During the sales the gap it prices at is MOVE_TO_GAP_BPS (twice) the asset's realised move over the trading week before the close, at least MIN_GAP_BPS (55%) of the engine's weekend gap for the asset and at most MAX_GAP_MULTIPLE (8) times it. The move is the root of the sum of the squared daily changes, in millionths, of the asset's Chainlink answers at the eight days that end a day before the close. The close fixes the days and the feed the rounds, so no caller chooses them. A week the feed cannot show, a day without a round or a positive answer, prices at the most. Outside the sales a quote uses the engine's gap.

A reference that has not caught up. The feed's last round becomes the reference only if no other prints before the sales end, and it can stand up to Chainlink's deviation threshold away from the market. Where it stands above the band's centre at a purchase, the layer is priced as measured from the centre, deductible and limit both lowered by the difference. The deductible so measured must reach the tail's threshold, or buy reverts with StaleReference. minDeductible already includes that difference.

Writers#

Writers deposit USDG and receive shares. Every cover reserves its whole possible payout, notional * (limit - deductible) / 10,000 rounded up, from their USDG until it is released (reserved, capacity). A purchase beyond what is free reverts with NoCapacity. A cover's premium is held apart (premiums) and joins the writers' USDG, less what the cover pays, when it is released.

Deposits are open while no cover is outstanding, or while every outstanding cover is over the coming closure and its sales have not ended. Redemptions open only while no cover is outstanding. The SDK's gapCover.writers and gapCover.writer return the pool and one writer's position.

Settlement#

A closure's reference is its feed's last Chainlink round started before the sales ended. Its reopening price is the first round that starts at or after the reopen, which is the 24/5 session's reopen or, where the feeds follow regular hours, the regular open after it. That round settles the series only when it lands within the settlement window and inside the band recorded in its minute. Otherwise the median of the band centres recorded in the window settles it, and the series is flagged (flagged in series). Every input is a Chainlink round or an Observed event, so anyone can rebuild a settlement.

The window. It is the 15 one-minute slots from the reopen (WINDOW_SLOTS), and no caller chooses it: a slot is recorded only within it and only from the band itself. A minute in which the band cannot vouch for the asset, recorded in the window's first slot, moves the window by one slot. A band that cannot vouch for it for more than 15 slots after the reopen (MAX_DELAY_SLOTS) leaves no window, and the series is void. The median settles a series only when at least 8 of the window's slots hold the band (QUORUM_SLOTS).

Void. A void series refunds its covers' premiums. Settlement voids a series whose window never opened, one without a usable round or a quorum, and one whose Stock Token's multiplier changed materially after its reference round started and before its window ended. A series no one settles within SETTLEMENT_DEADLINE, seven days after its close, can be voided by anyone with void.

Recording the closure. record stores the session's next close while the session is open and the reopen while it is closed. A closure keeps the close first recorded for it as the key of its series (lastCloseMs), even when the session revises the close. A series settles only once its reopen was recorded while the session was closed, so keepers call record during each closure.

The issuer's controls#

The cover counts its USDG itself, so USDG sent to it directly changes no share's value. While USDG is paused, the cover frozen or its USDG wiped, deposits and redemptions stop. Settlement and release go on, and claims wait. sync() counts a wipe as a loss to the writers, after the premiums and credits the cover holds.

Events#

Errors#

RedStone round feeds#

The cover reads Chainlink-compatible feeds with rounds, through the band. Where an asset has no Chainlink feed, as on the Robinhood Chain testnet, RedStoneRoundFeed is that feed. Anyone appends a payload from RedStone's redstone-primary-prod data service to update(). The feed checks it as RedStone's own contracts do: the data service's five signers, three unique, the median of their values, a package at most three minutes old. It keeps the value as the next round, numbered from one in one phase, with the package's time. It follows RedStone's feed of the asset's name, its price in regular hours, and scales it by the Stock Token's multiplier so that it prices the token as Robinhood Chain's Chainlink feeds do.

The registry names it as the asset's Chainlink feed and says in .chainlinkRegularHours that these feeds follow NYSE's regular hours, and the band and the cover follow. The feeds are not independent of RedStone's signers, as Chainlink's are. A feed younger than the week the cover reads prices at the cover's most.

Next#

• Weekend gap cover
• Band feeds
• Get the gap cover series
• Keepers