For Liquidity Providers

This section provides a technical overview of the Liquidity Provider (LP) perspective within Stryke’s Concentrated Liquidity Automated Market Maker (CLAMM), focusing on its operational fundamentals, comparison with Uniswap V3 (UniV3), and the integration of options trading within the liquidity provision framework.

Understanding UniV3 and Its Influence on CLAMM

UniV3 Overview

UniV3 introduces concentrated liquidity provisioning, allowing LPs to allocate capital within predefined price ranges, enhancing capital efficiency and potential returns. This model employs a tick-based system for delineating price ranges, offering granular control over liquidity positions. In contrast, traditional Uniswap V2 systems spread liquidity uniformly across an infinite range both below and above the spot price, leading to less efficient capital usage.

CLAMM’s Adoption of UniV3 Principles

Stryke’s CLAMM extends UniV3’s concentrated liquidity concept by incorporating options trading into the liquidity provision model. This adaptation maintains the core advantages of UniV3’s system while introducing an additional revenue stream from options premiums for LPs.

Comparative Analysis: UniV3 vs. CLAMM

LP Value Proposition

The fundamental value proposition for LPs in CLAMM mirrors that of UniV3, with both platforms providing mechanisms for strategic capital allocation to optimize returns, such as defining the allocation range and repositioning liquidity as market conditions change. The unique addition in CLAMM is the potential for earning options premiums on utilized liquidity ticks, further enhancing overall yield potential.

Utilized Ticks and Options Trading

In CLAMM, when liquidity within a specified tick is utilized for an option contract, it is temporarily transitioned out of the UniV3 liquidity pool to function as liquidity for option buyers, split into various strike prices. Once a certain amount of this liquidity is bought by an option buyer, it cannot revert to the UniV3 pool until the expiration or execution of the option contract, ensuring a clear delineation between standard liquidity provision and options engagement.

Reserving Liquidity

CLAMM provides a reserving liquidity feature, enabling LPs to secure a portion of their deposited assets for withdrawal after option expiry. This ensures that reserved funds are separated from the active trading pool, maintaining efficient trading activities while guaranteeing LPs can recover their assets.

Markets, Chains, and Supported Tokens

CLAMM supports a broad range of tokens and operates across multiple blockchain networks, including Arbitrum, Mantle, Base, and Blast broadening the scope of accessible markets for options trading. Initial support encompasses major cryptocurrencies like BTC, ETH, and native tokens of supported chains.

Incentives for Liquidity Providers

CLAMM offers a multi-faceted incentive structure for LPs, combining swap fee earnings for out-of-range liquidity with premiums derived from options contracts for in-range liquidity. These incentives are designed to maximize LP returns while accommodating the added dynamics of options trading. For the latest details on CLAMM incentives, refer to the official Stryke channels.

Integration with Uniswap V3 and Other Platforms

CLAMM is compatible with UniV3 and is extended through collaborations with platforms like Agni and Fusion X (on Mantle), Sushiswap, PancakeSwap and others. These integration facilitates a seamless transition for LPs between these ecosystems, enabling participation in a diversified range of DeFi activities and options trading opportunities.

Hooks

CLAMM utilizes hooks to execute additional logic during transaction processes, enhancing the flexibility and capabilities of options trading. This feature can be instrumental in automating trading strategies. Hook usage example for LP's include:

• Avoid selling options on weekend when IV is lower.

• Sell options only for specified timeframes.

• Token-gate liquidity (Example: only specific NFT holders).

• Restricting options from being sold, if it’s below a targeted premium.

If you are an LP interested in creating your own Hooks, we recoomend going through out our API documentation, and reaching out to us via. official channels (Discord & Twitter).

Future Enhancements and Examples

Future documentation will include practical examples of LP deposits, returns over time, and detailed case studies to illustrate the operational efficiency and return optimization achievable through CLAMM, compared to traditional liquidity provisioning and options trading mechanisms.