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SPYdw is hedged, not guaranteed. Its value can fall, including below the amount deposited. The floor is the value of the collateral, not a guaranteed minimum. This page sets out the main ways a holding in SPYdw can fall in value or be harder to exit.
[TBC] Draft for counsel review, including sign-off on the use of “floor”.

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Market risk

SPYdw holds SPY exposure, so it can fall when SPY falls. The hedge manages that exposure but does not remove it. SPYdw’s performance will differ from SPY’s.

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Collateral risk

The floor is the value of the collateral. If the collateral loses value, including the assets that generate its yield, the floor falls with it.

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Option risk

S&P 500 call options can expire without value if the index does not rise above their strike prices. When that happens, the yield spent on them is not recovered.

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Hedge budget risk

The hedge is paid for with the collateral’s yield. If that yield falls, SPYdw has less to spend on options to manage its exposure to SPY.

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Redemption timing

Redemptions are processed at the next epoch, which can be up to 7 days away. Redeeming before the end of an epoch incurs an early-exit fee.

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Venue and counterparty risk

The options are held through TradFi prime brokers. A prime broker or other counterparty can fail or restrict access, which can affect the value of the options or delay redemptions.

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Smart contract risk

The SPYdw contracts and the oracles they rely on can contain defects, be exploited or behave unexpectedly.