Strategy Vaults

Vaults on Premia Blue play a crucial role in enhancing the liquidity and capital efficiency of the base exchange. Depositing in vaults have significant benefits to users;

1. Vaults for Passive Users: Vaults enable passive users to participate in options markets automatically, market-making, and utilizing yield capture strategies created by Premia contributors and third parties. They can utilize standard range orders or the quote-based liquidity system to execute strategies, splitting returns across liquidity within the vault.
2. OTC Liquidity & Market-Makers: The over-the-counter (OTC) quote system allows vaults and market-makers to provide fillable option quotes to users, minimizing liquidity fragmentation. This system increases liquidity across strikes and maturities and enables professional market makers to optimize for both execution price and transaction fees.
3. Liquidity Across Volatility Surface: Specific vaults can provide liquidity across the entire volatility surface, decreasing fragmentation and increasing capital efficiency. Third-party providers can create vaults, enabling anyone to participate in strategy discovery and monetization. This enables a many-to-one relationship between vaults and pools.
4. Integration with Base Exchange Layer: The vault layer is built into the base exchange layer, addressing challenges with liquidity fragmentation across strikes and maturities. It provides just-in-time liquidity mechanisms to vaults and market-makers, enabling highly capital-efficient market-making for passive and active users.
5. Volatility-Based Pricing: Institutional traders can provide volatility-based quotes without paying EVM gas fees to manage on-chain liquidity positions.

1. Deposit Capital Into A Vault: By depositing collateral into a vault, you will receive vault share tokens that can later be redeemed for your pro-rata share of premiums and spreads by collected by selling options (less any applicable fees).

2. Vault Underwrites Options: The underwriter vault participates in one main algorithmic activity; selling options for a premium with a spread and holding until expiration.

3. Product Expiration & Profit Dispersal: As the options expire the capital is made available to be utilized again. This compounds the working capital and collects profits in the form of premiums and spreads. Profits are dispersed over the life of the underlying option for fair user accounting of all depositors.

4. Withdraw from The Vault: Upon withdrawal vault share token will be redeemed for your pro-rata share of the collateral, including P&L minus any applicable fees. if the working capital (utilization) exceeds your withdrawal amount a divesture will be required to be made avalable to you upon option expiration.