Lyra is the first complete decentralized options protocol built on Ethereum. It is an automated market maker for trading options on Ethereum. Successful market making depends on the ability to price options accurately and to effectively measure and manage risk. Two recent developments have made it possible to implement a traditional approach on-chain. The first is the advent of layer two, which makes computing aggregate risk practical. The second is the maturity of liquid spot markets, which enables protocol-toprotocol, or "composable" hedging of risk.