uSTONKS Explanation

uSTONKS is a Synthetic Token that tracks the Top 10 stocks, popularized by WallStreetBets. It trades 24/7 and trading activity cannot be censored.

What is uSTONKS?

uSTONKS is a synthetic token that tracks an index consisting of ten stocks that are most commented on r/wallstreetbets. The initial Index constituents are selected based on data from swaggystocks.com.

The ten tickers have been chosen ahead of the token launch and are equally weighted in the uSTONKS index. A base date is set where the index is 100 and each stock represents 10 points on the index.

The inaugural version of the token is uSTONKS-APR21 which consists of the ten tickers below. This token will base its index off of the December 31, 2020 exchange closes.

This table can be accessed here.

Why uSTONKS?

In light of the events from Q2 2021, decentralized finance has gained even greater importance. All individuals should have the same access and freedom to obtain the risk exposure they desire regardless of their financial means or nationality.

This statement expands beyond certain brokers offering access to specific stocks; indeed, it’s a question of worldwide access. This is a pivotal moment in time for the financial markets, and actions taken today will ripple into the future.

Index composition and performance data

You can see the construction of the index in the table and also how the index has performed over the last weeks in the chart. We created a simple Google Sheet to illustrate the calculations. The GOOGLEFINANCE functions in the sheet can be copied for one’s personal use in monitoring this index value.

Token specifications

The uSTONK-APR21 token will expire at 4:00PM EST on April 30th, 2021. The exact closing prices on the NYSE, NYSE Arca and NASDAQ exchanges for each stock will be used to calculate the final settlement of the uSTONKS index.

uSTONKS-APR21 Specifications

The importance of 2hr TWAP for all calculations

uSTONKS will use the 2-hour TWAP of its own token price to determine whether a position is collateralized or needs to be liquidated. This self-referential logic is needed because uSTONKS is a decentralized synthetic that trades continuously 24/7 whereas the underlying stocks in the uSTONKS index trade during exchange hours which leaves gaps in prices between the 4:00PM EST close and 9:30AM EST open the next day and on weekends and market holidays.

Using price feeds from the exchanges to monitor collateral ratios of token sponsors could be problematic outside of market hours especially if there is significant news released on a stock or meaningful macro market forces. Though some stocks are traded after hours, the ability to extract this price data is difficult and the frequency may not be consistent across all ten stocks.

Therefore, using the uSTONKS token price itself to monitor collateral ratios is a better alternative as it should reflect the actual price movements during exchange hours and also reflect expectations of price movements after market hours.

Technical details: Corporate Actions & Dividends

One technical detail to discuss is how to treat corporate action that may alter the price of an individual stock such as dividends and stock splits. The uSTONKS index will not adjust for dividends. Tickers in the current index have little to no dividends being paid and most stocks pay dividends in a predictable manner so there should not be a major impact on the index value from this source.

However, we have decided to account for stock splits in the index. If a stock does split we will simply adjust the base price accordingly and the final settlement would have no distorted impact and would only reflect the change in the market capitalization of the company. As with all price identifiers, if there are any unexpected events, UMA token holders will discuss and use their judgement to come to a fair conclusion.