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: the exercise function looped in a way that called the internal _exercise routine twice, so transferCollateral executed twice and the caller received both the settlement and the collateral. Traders used flash loans to acquire ETH put oTokens on Uniswap and then exercised them through this path. Around 371,260 USDC was taken. The Opyn team, later assisted by the researcher samczsun, conducted a white hat operation recovering 439,170 USDC from outstanding vaults and a further 132,995 USDC. 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 executed a loop one time too many. 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 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.