Contest ran 10 May 202214 May 2022

4 day contest

Cally contest

Earn yield on your NFTs or tokens via covered call vaults.

$50,000 USDC

Total Awards

Cally contest details

Cally x Code4rena competition

Hello anon, thank you for taking the time to participate in this competition. Please try to break everything! <3


Cally lets you create covered call vaults on any ERC20 or ERC721 that perpetually sell call options on the asset that you deposit into the vault.


Rinkeby demo site:

Rinkeby etherscan:



Contact us

Feel free to contact us if you have any questions.

out.eth (engineer) - online from 08:00 BST-23:30 BST

Contracts Overview

Name LOC Purpose
Cally.sol 219 Entry point to the protocol. Holds the business logic.
CallyNft.sol 220 NFT contract to represent Cally vault and option positions.

High level flow overview

A user specificies their desired premium, and duration (days) of each call they would like to sell. Every time the duration period passes, the option inside of the vault is put up for auction. The auction starts at a max strike price set by the vault owner initially and then decreases to 0 over time.

Regular example:

  • Alice creates vault with 0.1 ETH premium, 30 day duration on her BAYC, max strike of 500 ETH

  • Dutch auction starts at a strike of 500 ETH and decreases to 0 ETH over a 24 hour auction period

  • Bob buys the call for 0.1 ETH, 30 day duration at a strike of 164.3 ETH after T amount of time has passed

    either a)

    • Bob exercises his option after 23 days
    • He sends 164.3 ETH (strike amount) to the contract and the BAYC is sent to him. The 164.3 ETH is credited to Alice
    • His option is burned and Alice's vault is marked as isExercised and is stopped from starting any more auctions

    or b)

    • After 30 days Bob's option expires out of the money and he has chosen not to exercise
    • The option is automatically put up for auction again with the same parameters (0.1 ETH premium, 30 day duration, BAYC, max strike 500 ETH)

At any point Alice can harvest her uncollected premiums. If the option has been exercised then she can harvest the 164.3 strike ETH too. If Alice wants to withdraw her underlying assets (ERC721/ERC20) and close her vault, then she has to initiate a withdrawal first and then wait for the currently active option to expire.

Flow diagram:

                 │                │
                 │   NFT holder   │
                 │                │
          1.Create vault │
            + deposit    │
            NFT          │
                         │                   4.Transfer option
                         │                     from old trader        (Bob)
              ┌──────────▼──────────────────┐  to new trader   ┌────────────────┐
              │                             ├──────────────────►                │
              │          Cally.sol          │                  │     Trader     │
              │                             ◄──────────────────┤                │
              └─────────────────────────────┘ 3.Send premium   └────────────────┘
                     2.Start auction            ETH and buy
    ┌──────────────► for call option            option at the
    │                                           current auction
    │                                           strike
    │      *Some time passes*
    │         Flow (a): Trader decides to exercise
    │         ....................................
    │               6a.Credit ETH to
    │               beneficiary of the
    │               vault                      5a.Exercise and         (Bob)
    │         ┌─────────────────────────────┐  send strike ETH  ┌────────────────┐
    │         │                             ◄───────────────────┤                │
    │         │          Cally.sol          │                   │     Trader     │
    │         │                             ├───────────────────►                │
    │         └─────────────────────────────┘    7a.Send NFT    └────────────────┘
    │                                            to trader
    │      *Option duration time passes*
    │         Flow (b): Trader decides to let option expire
    │         .............................................
    │         ┌─────────────────────────────┐
    │         │                             │
    └─────────┤          Cally.sol          │
5b.Auction is │                             │
automatically └─────────────────────────────┘
restarted for
a new option

Withdrawal example:

Alice can also initiate a withdrawal on her vault and get her NFT back. This is the flow for withdrawals:

  • Alice creates vault with 0.1 ETH premium, 30 day duration on her BAYC, max strike of 500 ETH
  • Auction starts at a strike of 500 ETH and decreases to 0 ETH over a 24 hour auction period
  • Bob buys the call for 0.1 ETH, 30 day duration at a strike of 164.3 ETH after T amount of time has passed
  • Alice initiates a withdrawal (initiateWithdraw)
  • Bob's option expires out of the money after 30 days
  • Auction is not automatically started again because Alice's vault isWithdrawing
  • Alice can withdraw her BAYC and burn her vault

External calls

withdrawProtocolFees (onlyAdmin):



vault.tokenType == TokenType.ERC721
    ? ERC721(vault.token).transferFrom(msg.sender, address(this), vault.tokenIdOrAmount)
    : ERC20(vault.token).safeTransferFrom(msg.sender, address(this), vault.tokenIdOrAmount);


vault.tokenType == TokenType.ERC721
    ? ERC721(vault.token).transferFrom(msg.sender, address(this), vault.tokenIdOrAmount)
    : ERC20(vault.token).safeTransferFrom(msg.sender, address(this), vault.tokenIdOrAmount);


harvest (internal call):

vault.tokenType == TokenType.ERC721
    ? ERC721(vault.token).transferFrom(address(this), msg.sender, vault.tokenIdOrAmount)
    : ERC20(vault.token).safeTransfer(msg.sender, vault.tokenIdOrAmount);




Novel curve logic/mathematical models

Exponentially decreasing dutch auction with a reserve price

Every time an option expires, a dutch auction is started for the strike price of the new option being sold following an exponential curve. The input parameters are startingStrike, auctionDuration, auctionEndTimestamp, reserveStrike. To get the current strike price in the auction:

delta = max(auctionEndTimestamp - currentTimestamp, 0)
progress = delta / auctionDuration
auctionStrike = progress^2 * startingStrike
strike = max(auctionStrike, reserveStrike)

for example using the following parameters:

startingStrike = 55 ETH
reserveStrike = 1.5 ETH

yields an auction curve for the strike price that looks like this:

auction graph


There is a full test-suite included in the /contracts/test directory. We are using the foundry framework.

To run the tests:

  1. Install foundry, refer to foundry
  2. Install nodejs, refer to nodejs
cd contracts
npm install
forge test --gas-report


There are various optimizations that may make the contracts harder to reason about. These are done to reduce gas costs but at the expense of code readability. Here are some helpful explanations of those optimizations.

Premium and strike indexing

To save gas, the details of each vault are represented as a struct with packed variables. To reduce storage costs, premium and dutchAuctionStartingStrike are uint8 indexes. They index to:

uint256[] public premiumOptions = [0.01 ether, 0.025 ether, ... 100 ether]
uint256[] public strikeOptions = [1 ether, 2 ether, ... 6765 ether]

This means that instead of storing a uint256 for the strike and premium values, we can just store a single uint8 index that references one of those options in the array. The cost here is flexibility since a user is limited to our predefined set of starting strike/premium options.

Automatic auction starting

Auctions are automatically started without anyone having to call a method such as startAuction or something similar. If the block.timestamp is greater than the current expiration of the vault's option then the auction has started. This is the key condition. The start time of the auction is the expiration timestamp. When a vault is first created, the expiration timestamp is set to the current timestamp; this ensures that the auction is immediately started. Whenever a user buys a new option the expiration for the option in the vault is set to block.timestamp + duration. Maybe a nice intuition: expirationTimestamp == auctionStartTimestamp

Vault ID and Option ID

When a user creates a vault they are given a vault NFT. When a user buys an option, they are given the associated vault's option NFT (1 per vault). Vault token ID's are always odd. And option token ID's are always even optionId = associatedVaultId + 1. Each vault NFT has 1 associated option NFT which is forcefully transferred between the old owner -> new owner whenever they buy an option from the vault auction.

Removing balanceOf

Cally creates NFTs for each vault and option. All balanceOf modifications have been removed from the Cally NFTs. Given our use-case, it is a reasonable tradeoff. The balanceOf for each user is set to be defaulted to type(uint256).max instead of 0.

function balanceOf(address owner) public pure override returns (uint256) {
    require(owner != address(0), "ZERO_ADDRESS");
    return type(uint256).max; // return max for all accounts

This was done to save gas since not tracking the balanceOf avoids a single storage modification or initialisation on each transfer/mint/burn.

Areas of concern for wardens

We would like the main focus of this audit to be on trying to find core business logic flaws. Anything that would allow a user to siphon funds or somehow get unexpected behaviour. For gas optimisations, the most high impact functions are vault creation (createVault) and purchasing of the option (buyOption). These functions will be called more than any others.

There are a few places in the code where we have a lower confidence that things are correct. These may potentially serve as low-hanging fruit:

  • Timestamp manipulation

  • Dutch auction math error

  • ERC721 modifications

  • External contract calls via token transfers leading to re-entrancy