Summary
Lyra is a crypto exchange that specializes in perpetual futures and options. The options market is two-sided, meaning that users can both buy and sell options on the platform. The sell side of the market makes it possible to generate a consistent return on capital, also known as yield.
The strategy involves selling deep out-of-the-money call options and accruing options premiums. While it’s possible to do this manually using the Lyra options chain interface, the UX is advanced. By conducting a number of user interviews, I discovered that many traders were open to more advanced strategies, but only if they were presented in a simpler way.
A truism we often repeat internally at Lyra is that most crypto traders don’t really understand options. However, everyone who participates in defi understands the concept of a yield-generating vault. So the challenge was to isolate the call selling strategy and present it as a yield-generating vault.
Get rid of the options chain, explain the strategy with simplified visuals, and persuade users to deposit funds.
In the process of building this page, I leveraged many existing patterns from our design system and also created some new ones. Checking in every day or two with the VP of Product, it took a little over a week to come up with the index page for the vaults and two different approaches for the vault page, which I discuss in detail below.
Approach 1
The vault sells calls with a fixed duration and strike price, in this case 7 days and a $3,600 strike.
Each week, depositors earn yield if the ETH price is below the strike price on expiry.
The vault then reinvests the yield, compounding returns over time.
Yield Stack
A key feature of the vault is that it can only accept Liquid Restaking Tokens (LRTs) as collateral. LRTs are tokens that generate yield by securing multiple blockchains at once. The team decided to focus on LRTs because we saw it as an underserved niche in crypto (much less competition than ETH, BTC or stablecoins).
Each vault is named and branded with the LRT it takes as collateral, giving us the ability to do co-marketing with popular protocols like Swell, EtherFi and Ethena.
By focusing exclusively on LRTs, we combined several yield-generating layers into a “yield stack,” with the options strategy sitting on top:
Each vault has a different yield stack depending on the LRT and incentives.
Here’s the one for rswETH (Swell):
Strategy Graph Component
The centerpiece of the page is the strategy graph component, which shows the price of the underlying ETH in relation to the strike price.
While there’s about a 95% chance that the ETH price will be below the strike price on expiry, it’s not guaranteed. The strategy graph component allows users to simulate what the vault returns will be if ETH closes the week at a specified price.
The math here is not easy, especially the calculation that determines losses. The idea was to give the user something similar to a mortgage calculator, combined with an options payoff chart, allowing them to easily simulate different scenarios.
Approach 2
The second approach works the same as the first, except that it gives the user the ability to chose from several different durations and strike prices. This maps more closely to the way a user might select an option contract to sell from the options chain. More choice, but also more friction.
This version of the strategy graph component allows the user to simulate returns based on the duration and strike price they have selected.
Choosing the lower strike price increases the premiums earned. Lowering the duration also increases premiums, as long as the price finishes the duration blow the strike.
The strategy graph component allows users to see what their returns will be if the price of ETH finishes the week above or below the strike price.
Below:
Above:
Index pages
Conclusion
The team ultimately decided to go with Approach 1. While they liked the UX of Approach 2 and the idea of giving users more choice, they realized that there wasn’t enough options liquidity to consistently support multiple durations and expiries for the vaults.
View the live vaults here.