Thread by @jdorman81

Anyone like great risk/reward setups w/ high upside, low downside & tangible floor value? @NexusMutual $NXM $WNXM

WNXM now trades at a NEGATIVE net market cap. So how did NXM go negative?

A lesson in book value & optionality 👇

2) First, h/t to @DegenSpartan who nailed the "sell call". Investors who focused on $NXM price & the MCR completely misunderstood how Nexus & the NXM token works (myself included).

But the short thesis is completely over and it's now an "all-in buy"

https://twitter.com/DegenSpartan/status/1323330703589662720?s=20

Nexus Mutual, like all insurance companies, has to keep a certain amount of capital in their pool to pay out future claims. What they do with this capital is how insurance companies make money.

Profits = Yield on float + premiums paid > claims paid & inv losses

Simple business

The pool capital is called "Book Value". P/B is a good metric b/c insurance co's hold large amounts of assets, & investment return on float isn't usually included in earnings.

Book value is dominated by cash/bonds that can be liquidated, making this a very hard price floor.

Publicly traded insurance co's typically trade at 2-3x book value, but mainly because they have much more limited growth potential. Start up insurers should trade much higher. A startup crypto insurer should trade at 5-10x P/B.

$NXM trades BELOW book value. That's insane!

The math: nexustracker.io

A) ETH in capital pool: 162,320
B) NXM tokens o/s: 6,707,567

NXM book value (A/B) = 0.0242 ETH = $17.21 (based on ETH @ 711).

$WNXM trading @ $16.06 is at 93% of book value.

This is quite literally a free call option on ETH and #DeFi