How Nest Out Works
A covered call-like strategy using concentrated liquidity on Nest.
The Concept
In traditional finance, a covered call is when you hold an asset and sell someone the right to buy it at a specific price (the "strike price"). In return, you receive a premium — income you keep regardless of what happens to the price.
On Nest, we replicate this outcome using concentrated liquidity. Instead of selling an options contract, you provide liquidity in a price range that achieves the same result: you earn yield while the price is in range, and your tokens are gradually sold if the price rises to your target.
How It Works on Nest
1. You set a price range
The lower bound is the current market price of your asset. The upper bound is your sell target — the price at which you're happy to sell.
This creates a concentrated liquidity position in the pool between these two prices.
2. You deposit your tokens
Your tokens (e.g., HYPE) are deposited into the liquidity pool within your selected range. They start working immediately — earning yield from trading fees and Nest emissions.
3. The market does its thing
As the price moves within your range, your position is gradually converted from your token into stablecoins. This is how concentrated liquidity works — it's like a continuous limit order being filled as the price moves.
The Three Scenarios
Price stays in range
This is the best scenario. Your position is a mix of your token and stablecoins, and you're continuously earning yield from trading fees and Nest emissions. The longer it stays in range, the more yield you accumulate.
Price goes above your target
Your tokens have been fully converted to stablecoins at your target price. You've effectively sold at the price you wanted. You keep all the yield you earned while in range, plus the proceeds from the sale. Your position is now out of range and stops earning yield until you rebalance.
Price drops below current price
Your position is 100% back in your original token. You have an unrealized loss on the token price, but you still hold the same amount of tokens. Your position is out of range and stops earning yield until the price recovers. You can withdraw your tokens at any time.
Nest Out vs. Traditional Selling
| Aspect | Options | Nest |
|---|---|---|
| Income | Upfront premium from selling the option | Continuous yield from emissions while in range |
| Sell price | Fixed strike, all-or-nothing at expiry | Gradual conversion as price moves through range |
| Expiry | Fixed expiration date | No expiry — withdraw anytime |
| Counterparty | Option buyer required | No counterparty — liquidity pool |
| Custody | Broker or protocol holds assets | Non-custodial — on-chain smart contracts |
Risks to Understand
- 1.Impermanent loss. If the price moves significantly through your range, you may end up with less total value than if you had just held the token. The yield earned may or may not compensate for this.
- 2.Out of range = no yield. If the price moves outside your range (above your target or below the current price), your position stops earning. You'd need to rebalance to start earning again.
- 3.Range width trade-off. A tighter range earns higher APR but goes out of range faster. A wider range earns less but stays active longer. There's no free lunch.
- 4.Smart contract risk. Your assets are in on-chain smart contracts. While Nest's contracts are audited, no DeFi protocol is risk-free.
When Should You Use This?
This strategy is best when:
- - You hold a token and want to earn yield on it
- - You have a price target where you'd be happy to sell
- - You believe the price will stay relatively stable or trend up gradually
- - You want income while waiting for your price target to be reached