# Vault Liquidity

For every vault, the Vault Creator deposits the necessary liquidity to cover the two potential scenarios:

1\) **Linked Price Reached**

2\) **Linked Price Not Reached**

Since a vault's configuration always includes yield, the Vault Creator must deposit the required yield in both tokens to cover the two possible settlement scenarios.

## Simplified Example: ETH-USDC Buy Low <a href="#simplified-example-weth-usdc-buy-low" id="simplified-example-weth-usdc-buy-low"></a>

| Direction | Investment Token | Linked Token |
| --------- | ---------------- | ------------ |
| Buy Low   | USDC             | ETH          |

### In a Buy Low vault: <a href="#in-a-buy-low-vault" id="in-a-buy-low-vault"></a>

* The Vault Creator sets the maximum quantity of the Linked Token (ETH) they are willing to sell at the Linked Price.
* Vault Subscribers deposit the Investment token (USDC) into the vault for a chance to purchase the Linked Token at the Linked Price.
* The Vault Creator also deposits Investment Tokens (USDC) to provide yield if the Linked Price is not reached.

Here is the deposit formula for creating a Buy Low vault :

`Linked token: Quantity / Linked Price * (1 + yield)`

`Investment token: Quantity * yield`

#### When Linked Price Is Reached:  <a href="#when-linked-price-is-reached" id="when-linked-price-is-reached"></a>

* Vault Subscribers receive Linked Tokens (ETH) at the Linked Price based on their deposits, plus yields in the Linked Token (ETH).
* Vault Creator receives the Vault Subscribers' Investment Token (USDC) + Investment Token (USDC) that the Vault Creator initially deposited.

#### When Linked Price Is Not Reached: <a href="#when-linked-price-is-not-reached" id="when-linked-price-is-not-reached"></a>

* Vault Subscribers receives the Investment Token (USDC) that was deposited initially + yield in the Investment Token (USDC).
* The Vault Creator receives the Linked Token (ETH) that was deposited initially. The Investment Token (USDC) that the Vault Creator deposited is paid out in yields to the Vault subscribers.

## Simplified example: ETH-USDC Sell High <a href="#simplified-example-weth-usdc-sell-high" id="simplified-example-weth-usdc-sell-high"></a>

| Direction | Investment Token | Linked Token |
| --------- | ---------------- | ------------ |
| Sell High | ETH              | USDC         |

### In A Sell High Vault: <a href="#in-a-sell-high-vault" id="in-a-sell-high-vault"></a>

* The Vault Creator sets a maximum quantity of the Investment Token (ETH) they are willing to buy at the Linked Price.
* Subscribers deposit the Investment Token (ETH) into the vault for a chance to sell it for the Linked Token (USDC) at the Linked Price.
* The Vault Creator also deposits Investment Tokens (ETH) to fund yields if the Linked Price is not reached.

Here is the deposit formula for creating a Sell High vault:

`Investment Token: Quantity * Yield`

`Linked Token: Quantity * Linked Price * (1 + Yield)`

#### When Linked Price Is Reached:  <a href="#when-linked-price-is-reached-.1" id="when-linked-price-is-reached-.1"></a>

* Vault Subscribers receives the Linked Token (USDC) + yields in the Linked Token (USDC).
* The Vault Creator receives the Subscriber’s Investment Token (ETH) at the Linked price + Investment Token (USDC) that the Vault Creator initially deposited.

#### When Linked Price Is Not Reached:  <a href="#when-linked-price-is-not-reached-.1" id="when-linked-price-is-not-reached-.1"></a>

* The Vault Subscriber receives the Investment Token (ETH) that was deposited initially + the yield in the Investment Token (ETH).
* The Vault Creator receives the Linked Token (USDC) that was deposited initially. The Investment Token (ETH) that the Vault Creator deposited is paid out in yields to the Vault Subscribers.
