I have liquid vermillion and liquid deviance but none of them have a use option. I tried something on the egg and it hatched but it's not even right. What am I doing wrong? I don't get it!

You need to have Scheme: Activated Egg Grade 1. Click on that and add it to your library, then go to the Crafting -> Items menu and find it, and you can craft the activated egg using a hibernating egg and the other required items. Then I believe you can upbrade the activated egg using liquid vermillion, which will make the lykos you get from the egg likelier to have better genes. (I've never actually done this, as I have nice GP3 lykos and don't need a "wild" one from the egg, but this is my understanding.)