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What Is Auto-Close?

Auto-close is the layer that decides when to exit. In delta-neutral strategies you’re hedged and in theory you’re safe. But things break. When danger crosses a threshold, we close both legs. No debate. We live to trade another day. The alternative is liquidation. We treat that as unacceptable. We watch every open position continuously. When something looks wrong, we don’t wait for you to notice. We run through a checklist in order of priority, and the first item that says “close” wins. Below we explain each trigger, why it exists, and how we make sure the close actually goes through.

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How Auto-Close Works

Every open position is monitored continuously. Each cycle runs a priority-ordered check pipeline. The first check that triggers a close wins. Pipeline order (highest priority first):
  1. Cascade velocity detection “Will I be liquidated in the next few minutes?”
  2. Liquidation proximity “Am I too close to my liquidation price?”
  3. Delta drift / ADL detection “Did my position size change unexpectedly?”
  4. Funding rate inversion “Has funding been working against me for hours?”
If none trigger, the position stays open and the cycle repeats.

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The Problems That Trigger a Close (and How We Respond)

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Cascade Velocity: Liquidation Coming Too Fast for Level Checks

The problem. Checking how close you are to liquidation every few seconds sounds good, until you realize liquidation can happen in 60 seconds. During the October 2025 crash, $3.21 billion was liquidated in a single 60-second window. By the time the next check runs, you could be gone. How we respond. We don’t just ask “how close am I?” We ask “at the speed price is moving right now, how many minutes until I hit liquidation?” If the answer is “not long,” we close. A sharp wick doesn’t trigger this. It takes a sustained move in the wrong direction.

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Liquidation Proximity: The Static Safety Net

The problem. Even without a fast crash, price can slowly drift toward your liquidation level. You need something watching that regardless of speed. How we respond. We check the distance between your current price and your liquidation price on both sides of the position. If either side gets too close, we close both immediately.

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Delta Drift / ADL: The Exchange Force-Closes Your Profitable Leg

The problem. Exchanges don’t know you’re hedged. Auto-deleveraging (ADL) can close your winning leg and leave the other one sitting there, fully exposed. That’s the worst thing that can happen in a delta-neutral strategy. How we respond. We watch both sides of your position. If one leg disappears, we close the other immediately. If one leg shrinks or the two legs drift apart from each other, we close both. We never act on incomplete information. If we can’t read a leg, we wait for the next cycle.

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Funding Rate Inversion: The Edge Flips Against You

The problem. You entered because funding was positive. Now it’s negative and you’re paying instead of collecting. The whole reason the trade existed is gone. How we respond. We track funding rates across all supported venues. If net funding has been negative for several consecutive hours, we close. One bad hour is normal. Several in a row means the trade is no longer working in your favor.

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Collateral Depeg: Your Margin Is Worth Less Than the System Thinks

The problem. Your margin sits in stablecoins. If those stablecoins lose their peg, your margin is worth less than the system assumes and your liquidation price is closer than it looks. USDC dropped 13% during the SVB collapse. USDe hit $0.65 in October 2025. How we respond. We monitor your collateral every cycle. If it depegs meaningfully, we close all positions on affected venues immediately.

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Take Profit: Target Hit

The problem. There isn’t one. You’ve hit your target and want to lock it in. How we respond. When the target is hit, we close both legs.

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Close Execution and Retry: Making Sure the Close Goes Through

The problem. We trigger a close. The order doesn’t confirm. We can’t just assume it worked. How we respond. We send the close request and then watch to make sure it actually filled. If it’s taking too long, we retry. Each retry is a bit more aggressive to make sure it goes through. We check what actually filled, not just what was sent. If one leg closed but the other didn’t, we catch it. When both legs are on the same chain, we send them together so they either both close or neither does.

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What We’re Building

The following protections are designed, backtested against 7 historical black swan events, and scheduled for implementation. Four-tier margin defense. Instead of waiting until you’re near liquidation, we respond in stages: normal monitoring when things are healthy, blocking new entries and tightening take-profit when margin dips, reducing the position when it dips further, and closing everything in an emergency. Venue outage detection. If one exchange goes unreachable, we block new entries and alert you. If it stays down, we hedge on a third venue or reduce the open leg to limit exposure. Lighter was down 4.5 hours during October 2025. dYdX was offline for 8. Cross-venue price divergence. If the two exchanges start pricing the asset differently during stress, your hedge breaks down. We compare prices continuously and reduce or close if they drift too far apart. Kill switch. A separate process that can stop all trading immediately, even if the trading engine itself is hanging. Can kill per-strategy, per-venue, or globally. Auto-triggers if drawdown, margin, or delta cross safe thresholds. Entry rollback. If one leg opens and the other fails, we close the first leg right away. No one ends up with an unhedged position. Volatility circuit breaker. We block new entries when price has been moving too fast. Entering during peak chaos is when slippage and liquidation risk are highest. Pre-entry safety gates. A checklist that must fully pass before any trade opens. It covers funding quality, spread, crowding, volatility, margin buffer, insurance fund health, ADL risk, price feed freshness, and order book depth. If any item fails, we don’t enter. Exchange-side stop losses. Stop-loss orders placed directly on the exchange so they fire even if our entire system is offline. For the full safety framework and stress testing against 7 historical black swan events, see Safety Mechanisms. For how this fits with Overview, Perp to perp, and Spot to perp, use those links.