💸oTOKEN in the Money

Farming oTOKEN should always be profitable.

oTOKEN call options are almost guaranteed to always be in the money because 1 TOKEN >= 1 BASE at all times. Since the strike price for oTOKEN is 1 BASE, the only time they are not in the money is when TOKEN's floor price = market price (1 TOKEN = 1 BASE). At this point the intrinsic value of oTOKEN would be 0, however this is an unlikely scenario because of the in built borrowing mechanism and floating LTV.

In the scenario where 1 TOKEN = 1 BASE, the LTV would be nearly 100%, drastically lowering the risk of purchasing TOKEN. As an example, say the floor price of TOKEN is 1 WETH/TOKEN and the market price is 1.05 WETH/TOKEN. If someone were to purchase 10 TOKEN they would spend around 10.5 WETH, they can immediately stake TOKEN for vTOKEN and borrow 10 WETH. So they are really only risking 0.5 ETH.

As the market price of TOKEN goes down, the risk and opportunity cost to buy it also decreases, allowing opportunistic participants to purchase cheap voting power, which pushes the TOKEN price up and moves oTOKEN further into the money.