Curriculum·R406 Options and Structured Positions·about 34 min
What not to do, and what is on-chain
By the end of this lesson you can
- →List the five option positions this curriculum tells you not to take, and why
- →Explain what an on-chain option adds to the risk of the option itself
- →Compute the stacked probability that one layer of an on-chain structure fails
- →Evaluate an automated option vault by what it is systematically short
Senior · enrolled learners
This lesson opens with The Opyn v1 exploit, 4 August 2020.
- What happened
- Opyn issued on-chain options as oTokens, with sellers posting collateral into the protocol. On 4 August 2020 an attacker exploited a flaw in the exercise path of the ETH put contracts. The external exercise function called the internal _exercise routine once per vault in a loop, and each call checked the same msg.value, so ETH sent once was counted for every vault. Exercising against their own vault and a victim's in one call, the attacker paid for one exercise, had transferCollateral pay out USDC twice, and then redeemed the ETH from their own vault. The attacker had bought the ETH put oTokens on Uniswap just before. Opyn put the loss at 371,260 USDC. With the researcher samczsun, the Opyn team ran two white hat operations that moved 439,170 USDC and then a further 132,995 USDC of still-exposed collateral to safety. Only the ETH put contracts were affected, and all affected oETH put sellers were reimbursed in full.
- The decision point
- Nothing about the option was mispriced and no market moved against anybody. The contract counted one payment twice. An on-chain option is two contracts at once, being the option and the code implementing it, and the second one carries a risk that has nothing to do with volatility, strikes or expiry. Per J312-04's payer condition, that is the same structure as an insurer failing by the mechanism it insures against.
- Recorded loss
- $371,260
What you will be able to answer
- →What are the five positions not to take?
- →What does on-chain add?
- →What does the stack cost?
- →What is an option vault systematically short?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://medium.com/opyn/opyn-eth-put-exploit-post-mortem-1a009e3347a8
- https://slowmist.medium.com/slowmist-detailed-analysis-of-opyn-contract-being-hacked-5b0308b3ba6f
- https://decrypt.co/37671/blatant-bug-led-to-370000-defi-hack-say-experts
- https://cryptopotato.com/defi-protection-platform-opyn-loses-370k-in-double-exercise-attack/
Confidence high·Volatility high·Reviewed 2026-08-07·Owner unassigned
Contested
The mechanism here follows Opyn's own post-mortem, which gives the loss as 371,260 USDC and the two white hat rescues as 439,170 and 132,995 USDC. Some press reports said the attackers used flash loans to buy the oTokens; the post-mortem says the attacker bought them on Uniswap just before, and the only flash loan it describes is Opyn's own, used in the second white hat operation. SlowMist dates the attack 5 August; Opyn's first public statement is dated 4 August, Pacific time, and Decrypt's report of 5 August calls it yesterday, so this lesson uses 4 August.
The Opyn incident concerns a version of the protocol that has since been replaced, and the specific flaw is long fixed. It is used here because the post-mortem is public and precise, not as a statement about that protocol today. Every on-chain option venue should be assessed on its current audits, its current contracts and its current recovery record.
The stacked probability in part two uses stated per-layer figures that nobody publishes and that cannot be estimated from outside. Per P12 they are on the page so they can be replaced. The conclusion, that independent layers multiply rather than add, holds at any plausible values.
Automated option vault designs and their published performance change frequently and the category is marked high volatility for that reason. R410 owns delegated and vault-based execution in general. This lesson owns what such a vault is short in option terms. Keep the split.