/lyra-vaults

option selling strategies on Lyra finance

Primary LanguageTypeScript

Lyra Vault

Coverage Status

The lyra-vaults repo is a round-based options vault able to both buy and sell options against the Lyra options market. It is intended to be used as an example project to showcase how a vault might interact with Lyra contracts, testing/deployment tools provided by the @lyrafinance/protocol SDK and various options strategies.

⚠️ This project is for example use only and has not been audited. USER AT YOUR OWN RISK.

Documentation:

  1. Installation & Testing
  2. Behavior
  3. Architecture
  4. Vault Accounting
  5. Building a new strategy
  6. Deploy

Installation & Testing 

yarn install --frozen-lockfile
yarn test
yarn coverage

see Integration Testing for hardhat testing against a full local Lyra market without need for mocks.

Behavior

  1. Before round start
    1. manager sets the managementFee, performanceFee, managementRecipient, lyraRewardRecipient, vault cap,
    2. manager also sets the strategy contract which will determine what/when to trade via LyraVault.setStrategy()
    3. users LyraVault.deposit() the base ERC20 into the vault while getting an allocation of ERC20 vault shares in return
  2. On round start
    1. manager calls LyraVault.startNextRound(boardId) to set the board which will be traded
    2. unlocked funds from last round are accounted for
    3. queued withdrawals/deposits from last round are processed
  3. During round
    1. anyone can "poke" the vault to trade(strikeId) or reducePosition(positionId, closeAmount)
    2. the strategy contract determines whether the requested trade or reducePosition are valid
    3. if valid, strategy will transfer required funds from LyraVault to itself and execute the trade
    4. Premiums earned and option positions are all held by the strategy until reducePosition() is called or round ends
  4. On round end
    1. unlocked funds from last round are accounted for
    2. all funds are moved from the strategy contract back to the vault.

Note: to accrue lyra trading rewards, Lyra must whitelist the strategy contract to make sure (a) inherit the LyraAdapter.sol with no modifications to _open/close/forceClosePosition functions (b) the strategy contract must not be upgradeable

Architecture

The vault structure is broken down into 3x main components:

  • vault accounting - contracts/libraries in core/ and libraries/ that manage share deposit/withdrawal/NAV logic as well as roll-over logic between rounds.
  • strategy - contracts in strategies/ that determine what positions to trade. Everytime a trade is made, StrategyBase.sol takes funds from the LyraVault.sol and keep earned premiums until a position is partially closed or the round is ended.
  • @lyrafinance/protocol - uses LyraAdapter.sol to interact with Lyra and accrue trading rewards

This component breakdown accommodates wide range of option strategies as only the contracts in the strategy component need to be swapped out for a novel options strategy.