D2 Finance’s highly anticipated Lyra++ market launch on Camelot marks a significant milestone in the decentralized finance landscape.
Lyra++ introduces a revolutionary approach to options trading, leveraging relative value volatility trading strategies to optimize returns and mitigate risks effectively for ALL D2 Finance vaults, starting with the flagship ETH++ vault.
Why Lyra++ Stands Out:
Helper Vault and V0 Architecture:
Lyra++ operates as a helper Vault within the D2 vaults ecosystem, utilizing the V0 architecture for streamlined operations and enhanced efficiency in options trading.
This unique approach prioritizes investor protection, ensuring that external participants are shielded from potential losses.
That is, other vaults will share gains attributed to their sub-accounts in Lyra, but given our architecture (trader contract cannot send any token outside of the defined parameters), sharing losses is impossible. D2 protocol and Luca’s capital will bear the first losses (if any KEK), facilitating the exponential growth of other vaults expected in the following months.
Subaccounts
https://docs.lyra.finance/docs/ux-create-or-deposit-to-subaccount
Lyra makes it very easy for us to have sub-accounts while maintaining capital efficiency and net exposure across multiple strategies; akin to the operations of a traditional hedge fund.
We estimate that it will make sense to have a single account for specific vaults with 10M+ TVL. This would not only make sense from a business perspective but also in terms of SDK/API integration. Lyra has assured us that they will assist in this process, as we anticipate becoming their top client.
Internal Capital Only:
Employing internal capital exclusively, Lyra++ comprises funds from the protocol and Luca’s initial investment. This strategy underscores D2 Finance’s commitment to security and stability, providing a robust foundation for sustainable growth and instilling investor confidence to invest capital without adding additional risks or the need for D2 to adapt the code and undergo a new audit.
The opportunity is here, and D2 must seize it.
Launch Date and Liquidity:
Scheduled for launch on March 1st, 2024, Lyra++ is launched one week before ARB++ and ETH++ deposits open, enabling a more gradual scaling of exposure and reducing pin risk for ARB++ and ETH++ external investors. With liquidity set at 50k USDC, Lyra++ strategically allocates capital, focusing on a long volatility bias to optimize returns within a risk-adjusted framework.
Composability:
Serving as a helper for multiple vaults within the D2 ecosystem, Lyra++ contributes to their success and ecosystem growth, solidifying D2’s position as the main trustworthy gateway for institutional capital in the Arbitrum ecosystem, backed by a solid track record and hard verifiable data.
https://dune.com/d2_finance/d2-finance-analytics
Understanding Relative Value Volatility Trading:
Carry Considerations:
Volatility, in institutional settings, is often considered as part of carry strategies, with the difference that “the yield” is between realized volatility and implied volatility becoming crucial. Lyra++ strategically evaluates this difference to enhance returns and manage risk exposure effectively, recognizing the importance of market positioning for effectiveness of carry layer.
Volatility Spread “fair value” and reflexive dynamics:
Modeling implied volatility spread between pairs is paramount in relative value volatility trading. Lyra++ leverages both mean reversion and reflexive dynamics to optimize trading strategies and mitigate risk.
Not absolute, but relative approach:
In relative value trading, the focus shifts away from absolute values, which most participants typically prioritize, to the distribution of a dynamic mathematical relationship that can be mispriced in the short term. Lyra++ underscores this fundamental principle, emphasizing scaling in and out of trades based on relative positioning.
Similarities to Dispersion Trading:
Relative value volatility trading exhibits similarities to dispersion trading, a specialty for which Luca was widely recognized globally. This similarity enables effective risk management and optimization of trading strategies. Leveraging insights from traditional pair trading and dispersion trading, Lyra++ adeptly navigates complex market dynamics to maximize returns within its options trading framework.
Key Takeaways:
Relative value volatility trading in Lyra++ offers a nuanced approach to decentralized finance, emphasizing stability and optimization in trading strategies. As far as we are aware, no one else offers anything similar.
By focusing on the difference between implied volatilities, Lyra++ capitalizes on orthogonal ( to just “numba go up”) dynamics to enhance returns and mitigate risks effectively.
Leveraging insights from traditional pair trading and dispersion trading, Lyra++ pioneers innovative approaches to options trading within the decentralized finance landscape, positioning itself as a leading player in the market.
Why Lyra?
We have been trading in Lyra V2 from its launch day, and we are convinced it is the best DeFi Options protocol in the market. While we will still leverage other protocols like AEVO, Stryke(formerly Dopex), Rysk, and Premia, and any new exciting legos in the options space, we are ecstatic about the Lyra launch. It will help us increase scalability multiple times, being able to trade in 100 ETH sizes with acceptable market impact. We have been in the alpha program of Lyra and have already been a top trader on the platform with limited TVL.
Increasing our Total Value Locked (TVL) will also enhance our special volume in Lyra’s platform, fostering a synergistic relationship between our strategies and Lyra.
You can find Lyra Roadmap here:
https://mirror.xyz/itseneff.eth/cWU0JLrbtixq57M4q8o-Tqo4Zo3Fk2jPMVDU1Mz6fVg
To paraphrase Nick, there is an enormous opportunity in the market right now, a market which D2 is best positioned to run headfirst into based on our experience, tools and skillset.
FAQ
Will Lyra++ eventually become a standalone strategy accessible in the market? Possibly. Hence, we seeded the pool in Camelot for the purpose of creating a verifiable, on-chain track record. As such, there is currently no liquidity on the ask side at this time.
However, as we establish a leading position in the options DeFi space, we anticipate that we will likely package it with other strategies to emulate our competitors, such as Multi-Strat Hedge funds like Citadel, Millennium, Brevan Howard, and others.
D2.Finance brings the sophistication of a top-tier quant hedge fund on-chain. Single click deposit into Options Based Strategies focused on risk adjusted returns through decentralized, actively managed vault architecture, tailored to varying risk levels.
D2 Finance aims to harness its existing and burgeoning institutional fund contacts to facilitate on-chain asset exposure through institutional grade infrastructure and active quant trading.
Join the D2 Finance community
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Disclaimers:
Performance Disclaimer:
The indicative ROI/APY shown in d2.finance front-end is not guaranteed and is subject to market risk. The strategies are not risk-free, and some epochs may result in a negative return. Further details and protocol incentives can be found in https://gitbook.d2.finance/. While the information contained within the website is periodically updated, no guarantee is given that the information provided in the website is correct, complete, and current.
Changes and Updates
Please note that the features, terms, and conditions may change accordingly market dynamics, but will always have heads up before the withdrawal window. Stay informed by reviewing our documentation regularly.
Sophistication Requirement
Participation in our strategies is intended for individuals who meet certain financial criteria that classify them as high net worth or sophisticated investors. The definition of a high net worth or sophisticated investor varies by jurisdiction, but generally includes individuals with significant experience in financial and business matters, making them capable of evaluating the merits and risks of prospective investments. Investing in advanced financial strategies carries inherent risks, including the potential loss of capital. Prospective investors should be fully aware of these risks and are advised to conduct thorough due diligence.
