RWAs leverage covered-call vaults to enhance tokenized gold income

Gold has been humanity’s favorite store of value for roughly 5,000 years. What it has not been, in all that time, is a source of regular income. A new on-chain structured product from Enhanced is trying to change that, applying a well-worn options strategy to tokenized gold and packaging it in a way that makes Warren Buffett’s old complaint about the yellow metal (“it just sits there”) a little less valid.

The product is called the PAXG Volatility Income/Yield Vault, and it launched in early August 2026 as the first entry in Enhanced’s “Thesis Vaults” series. The pitch: deposit your PAXG, a gold-backed token issued by Paxos, and the vault sells covered-call options against it, collecting premiums that get distributed to depositors in stablecoins like USDC every two weeks.

How the vault actually works

Covered calls are one of the most conservative options strategies in existence. You own an asset, you sell someone the right to buy it at a higher price, and you pocket the premium regardless of what happens next. If the price stays flat or dips, you keep the asset and the premium. If it rallies past the strike price, you miss the upside beyond that point but still collect the premium.

Enhanced’s vault automates this process on-chain. It sells bi-weekly European-style out-of-the-money call options on deposited PAXG, with strike prices dynamically set at 3-7% above the current spot price. The options are sold through a competitive request-for-quote auction to institutional market makers, which helps ensure depositors get fair pricing on the premiums.

The vault targets annualized returns between 4% and 14%, depending on gold’s volatility at any given time. Higher volatility means fatter premiums, which means better yields. Lower volatility means thinner premiums, but also less risk of the gold getting called away.

Depositors can choose what to do with their stablecoin income: either withdraw it or auto-swap the earned premiums back into more PAXG, compounding their gold position over time. The protocol charges roughly 0.019% per two-week epoch, which works out to approximately 0.5% annualized.

Why tokenized gold needs a yield story

The tokenized gold market sits somewhere between $4.9B and $5B. That is a meaningful chunk of capital, and nearly all of it is just sitting there doing nothing productive. Gold does not pay dividends. It does not generate interest. It appreciates (or doesn’t), and that is the entire value proposition.

The concept has a clear precedent in traditional finance. The GLDI ETF has been running a similar covered-call strategy on physical gold since 2013. Its first-year APY ranged from 9% to 26%, though it comes with a higher expense ratio of around 0.65% and the usual baggage of traditional financial products: issuer credit risk, custodial complexity, and limited accessibility for non-institutional investors.

Enhanced’s on-chain version shaves costs (0.5% vs. 0.65%), eliminates intermediary credit risk through smart contract execution, and opens the strategy to anyone with a wallet and some PAXG. The transparency of the RFQ auction process also gives depositors visibility into how their premiums are being priced, something GLDI investors do not typically get to see in real time.

What this means for RWAs and DeFi

The risk profile deserves honest acknowledgment. Covered calls cap your upside. If gold rips 15% in a two-week period, vault depositors would miss a significant portion of that move. For investors who hold gold primarily as a crisis hedge expecting sharp upward moves, this tradeoff may not make sense. The strategy works best for holders who want to monetize their position during periods of moderate volatility and are willing to sacrifice some tail-end upside for consistent income.

There is also the question of options market depth for PAXG specifically. The vault’s returns depend entirely on institutional market makers showing up to buy those call options at competitive prices. If demand for PAXG options thins out, premiums shrink and so do yields. Enhanced’s RFQ auction format helps, but it still requires a healthy ecosystem of counterparties.

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