# Vault Liquidity

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

* **Linked Price Reached**
* **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          |

### 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.
* Vault 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.


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