How Spout Offers 0% Interest Borrowing Against Tokenized Stocks
Guides
November 10, 2026
Discover how Spout uses covered call premiums and Treasury bill yield to fund lenders, allowing users to borrow USDC against tokenized stocks at 0% interest.
Borrowing against stocks usually comes with interest. The longer you keep the loan, the more you pay.
Spout approaches stock-backed borrowing differently.
Instead of charging borrowers interest, Spout uses a covered call strategy on the shares backing its collateral pools to generate premiums. These premiums help fund the yield paid to lenders who supply USDC to the protocol.
This allows borrowers to access USDC against their tokenized stocks at 0% interest without having to sell their holdings.
But how does the model work, and where does the money come from?
Why Does Spout Charge 0% Interest?
Traditional stock-backed loans generate income through interest payments from borrowers.
Spout uses a different source of income.
When borrowers deposit supported tokenized stocks as collateral, those assets join their respective collateral pools. Spout writes covered calls against the underlying shares backing these pools.
Options buyers pay premiums for the right to purchase those shares at an agreed price, known as the strike price, before a specified expiry date.
These premiums generate income for the protocol. After the protocol fee, the premiums flow into the lending pools and help pay lenders.
Since lenders receive income from the covered call strategy, Spout doesn’t need to charge borrowers interest to fund lender yield.
In simple terms, the assets backing the loans help generate the income used to pay lenders.
How Does the Covered Call Strategy Work?
A covered call is an options strategy where someone owns an asset and sells another person the right to buy it at a predetermined price within a specific period.
The buyer pays an upfront premium for this right.
Here’s how Spout uses the strategy:
- Borrowers provide collateral: Users deposit supported tokenized stocks into Spout.
- Shares enter collateral pools: The underlying shares backing the collateral are held through Spout’s brokerage account.
- Spout writes covered calls: Spout sells standard listed call options against the pooled shares through its brokerage account.
- Options buyers pay premiums: Buyers pay upfront premiums for the options contracts.
- Premiums support lender yield: After the protocol fee, the premiums flow to the lending pools and are distributed between the Senior and Junior lender tranches.
The options strategy runs in weekly or two-week cycles, depending on the asset.
The premiums generated depend on factors such as market volatility, the amount of collateral in the pools and what options buyers are willing to pay.
Where Does the Lender’s Yield Come From?
Covered call premiums are one source of lender yield. The other is Treasury bill yield.
Spout uses two income sources:
- Covered call premiums
When options buyers purchase covered calls, they pay premiums upfront. After the protocol fee and other allocations, the lender portion flows into the lending pools.
- Treasury bill yield
USDC that isn’t currently lent to borrowers is held in a tokenized US Treasury fund and earns yield. This provides another source of income for lenders.
Together, these sources help fund lender returns without relying on borrower interest payments or token emissions.
What Does This Mean for Borrowers?
For borrowers, the model means access to liquidity without paying recurring borrowing interest.
Users deposit supported tokenized stocks as collateral and borrow USDC against their value, with a maximum loan-to-value ratio of 50%.
For instance:
If you deposit $10,000 worth of supported tokenized stocks, you can borrow up to $5,000 in USDC.
Your loan doesn’t accumulate interest over time. Its balance only changes when you borrow more or repay.
You also don’t have to sell your tokenized stocks to access the borrowed funds.
However, there is an important trade-off.
When a covered call is exercised, the borrower gives up the upside above the strike price on the shares involved in that cycle. If the stock doesn’t rise above the strike, the option expires unused and there is no upside surrendered for that cycle.
This is how the strategy creates income while changing how borrowers participate in potential stock price gains.
Does 0% Interest Mean Borrowing Is Completely Free?
No. A 0% interest rate means Spout doesn’t charge interest on the loan. It doesn’t mean there are no trade-offs.
Borrowers should understand two important considerations:
- Covered call assignment: If the stock rises above the strike price and the option is exercised, the borrower gives up the upside above that strike on the affected shares.
- Liquidation: If the collateral value falls and the loan’s LTV passes the asset’s liquidation threshold, some collateral can be sold to bring the position back within the required limit. A liquidation penalty applies to the collateral sold.
Understanding these mechanics helps borrowers decide whether the model suits their investment strategy.
Why Is This Model Useful?
Spout’s approach changes how tokenized stocks can be used within onchain finance.
Instead of treating tokenized equities only as assets to hold or trade, Spout uses the shares backing them to support a lending market.
Borrowers get access to USDC without paying recurring interest, while lenders receive yield generated through covered calls and Treasury bill income.
It also brings a model associated with institutional prime brokerage into an onchain lending environment.
Conclusion
Spout’s 0% interest borrowing model works by using income generated from the assets backing borrower collateral to help pay lenders.
Covered call premiums and Treasury bill yield provide the income, rather than interest payments from borrowers.
The result is a different approach to stock-backed borrowing, where users can access liquidity against their tokenized stocks without paying recurring interest.
Want to learn more about how Spout works?
Explore the documentation for more details on