Modulis 6 · Strategies

4/9

Crisis playbooks

Video · 2 min.

Crisis management — plan B

SOL fell 20%, and Diana doesn't think — she runs the plan she wrote before the crisis. With a smoke alarm and a pilot's checklist as analogies, you'll see the crisis triggers (LTV 45% or −20%), why panic selling often costs more, how Kamino's partial liquidation works, and the four LTV levels to know in advance.

Narrated, with light music

The full lesson with numbers and rules is below.

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Why do you need a crisis plan?

DeFi markets move fast — SOL can drop 30% in a day. That's not a disaster to fear, it's a scenario you handle. In this lesson you'll prepare a concrete action plan for every move, so that during a crisis you don't think — you just execute.

The pilot analogy

An airline pilot doesn't improvise what to do when an engine catches fire. They have a checklist — a procedure prepared in advance for every situation. Portfolio management should work the same way: situation -> action -> outcome. When a crisis hits — there's no time to think. You act according to the plan.

Table of all situations

Situation	When to react	Urgency	What to do
Downturn	LTV >= 45% or price -20%	Critical	Sell the Put, close the LP, stabilize
Jump	Price +15-20%	Medium	Roll the Put strike up
Mega jump	Price +100%	Low	Accept the Call assignment, USDC to the vault
LP asleep	Price < LP lower bound	Medium	Move or close the LP
Options expiring	< 30 days left	Medium	Put roll window
Coverage < 1.0x	LP earnings < breakeven	Medium	Reduce the options cost

Situation 1: Downturn (LTV >= 45% or -20%)

This is the situation that requires the fastest reaction. The price is dropping, LTV is climbing — but you have an exact sequence to stop it well before liquidation.

When to react

LTV reaches 45%
OR the price drops 20%
Either of these is enough to start

Pause and assess. Is this a short-lived jolt (flash crash) or a real downturn? If unclear — treat it as a downturn
Sell the Put options. The Long Put is now in profit (because the price dropped). Sell it — the profit will offset part of the loss
Close the LP position. The LP has already converted part of the USDC into SOL. Close it and take the remaining capital
Repay part of the debt. Use the proceeds to reduce the debt. Target: LTV below 35%
Wait for stabilization. Once the price stops falling (2-3 days), restart the strategy

Numbers as an example (SOL: $88 drops to $70)

Action	Amount	Effect
Put profit	+$1,800	Offsets the loss
LP closed	~$2,900	Returns capital
Debt repaid	-$3,000	LTV drops
New LTV		~19% (instead of 53%)

If LTV reaches 65% — that's a CRITICAL level. There's no time left to optimize. Repay the debt immediately, even if it means selling collateral at a loss.

Situation 2: Jump (+15-20%)

The price rises. Good for you, but you need to refresh your protection.

The problem

When SOL rises from $88 to $105 (+20%):

The $90 Put is now far from the price — protection is weak
The LP position ($64-$88) isn't generating fees — the price is above the range
LTV has dropped (good!) — but the protection no longer matches

Action plan

Raise the Put strike. Roll (sell the old option, buy a new one with a higher strike) the Put Spread closer to the new price (e.g., $100/$75)
Move the LP range. Close the old range ($64-$88), open a new one ($84-$105). The LP earns again
Assess the Covered Call. If the $160 Short Call is still far away — leave it
Accept the loss on the old Put. The old Put may be nearly worthless — sell it for whatever residual value remains

Action	Cost	Result
Sell old Put	+$150	Frees up capital
Buy new Put	-$900	Fresh protection
Move the LP	~$50	Fees generate again
Net cost	-$800	Refreshed protection

Situation 3: Mega jump (+100%)

SOL doubles — from $88 to $176. Rare, but possible.

What happens

Covered Call is assigned (assignment — a mandatory SOL sale at the strike price): the $160 Short Call (50 SOL) — you must sell 50 SOL at $160
You receive: 50 SOL x $160 = $8,000 USDC
Left: 76 SOL x $176 = $13,376

Accept the assignment. Selling 50 SOL at $160 = an 82% gain. That's a good outcome
The USDC goes into the "Insurance Vault." $8,000 — a large buffer
Repay the full debt. From the $8,000, repay the 4,704 USDC debt. ~$3,296 remains
Restart. Start a new cycle with 76 SOL and $3,296 USDC

Position	Before	After assignment
SOL	126 SOL	76 SOL
USDC	-4,704 (debt)	+$3,296 (cash)
Portfolio value	$11,088	$16,672 (+50%)

Assignment is a sale at a profit

When a Covered Call is assigned, the mechanics are simple: you sold at a profit. The only "cost" is giving up some further upside. But you still make +82%. That's an excellent outcome, not a loss.

Situation 4: LP asleep (out of range)

The price dropped below $64. The LP position has fully converted into SOL. Fees are no longer generated.

What's happening	What to do
Price only slightly below range	Wait 24-48h — it may come back
Price well below range	Close the LP. Move the SOL to collateral
Price returns	Nothing — the LP automatically starts earning again

While the LP is "asleep," you get no fees but still carry impermanent loss. A long wait = a loss with no compensation.

Situation 5: Coverage too low

LP earnings have dropped below breakeven (~46%):

Coverage = LP fees/day / (|Theta| + debt interest)
         = $3.50 / $4.02
         = 0.87x  <-- too low!

Assess the cause. Did LP earnings drop because of low trading volume, or a range problem?
If it's a volume issue: wait 1-2 weeks. Trading volume fluctuates
If it's a structural issue: reduce the options cost — narrow the spread or sell an additional Short Put
If it's long-term: restructure the strategy with lower costs

Warning levels

Level	LTV	Color	What to do
Normal	< 45%	Green	Weekly cycle
Warning	45-55%	Yellow	Prepare the crisis plan
Danger	55-65%	Orange	Reduce the debt
Critical	> 65%	Red	Urgent debt repayment
Liquidation	> 75% (Kamino SOL collateral)	Black	The protocol starts partial liquidations

The threshold depends on the collateral, and liquidation happens in pieces

There isn't one threshold for all of Kamino. It depends on what you posted as collateral: the liquidation threshold for SOL collateral is 75%, for USDC collateral it's 90% (checked via the Kamino API, 2026-09). Parameters change, so check them in the specific market where you open your position.

Liquidation is not a single "everything is gone" event. Kamino doesn't liquidate the whole position at once: one liquidation covers up to 10% of the debt (the close factor), and the penalty is dynamic — from 0.1% up to 10%, depending on how fast a liquidator steps in.

In the June 2026 drop (SOL from $81 to $62.50) there were 48,905 partial liquidations: the median was 25% of collateral, and the average liquidation bonus was ~0.07% of position size. Why this matters in a crisis: panic-closing a position with heavy slippage sometimes costs more than one partial liquidation. This isn't an argument for letting yourself be liquidated — only that liquidation is not an excuse for a rushed, badly priced trade.

Edge cases

Deribit unreachable

What: You can't connect to Deribit ad at a critical moment (technical issues, KYC review).

What to do:

Immediately: close the LP position via Jupiter — get USDC
Within 1h: repay part of the debt, lower the LTV
Later: if Deribit stays unreachable for a while — reduce risk via Kamino (add collateral, reduce debt) or simply wait until Deribit works again

SOL -50% in a single day (flash crash)

What: An extreme scenario (the 2022 FTX collapse: SOL -60% in 48h).

What to do:

Within 30 min: STOP, do nothing, assess whether this is panic or a fundamental event
Within 1h: close the LP (it has converted into 100% SOL)
Within 2h: sell the Put options (now in profit — this is your insurance source)
Within 4h: repay the debt from the Put profit
Within 7 days: wait for IV to stabilize, then restart with new parameters

The protocol changes its parameters

What: Aave/Kamino DAO lowers the SOL/ETH LTV limit (e.g., from 75% to 65%).

What to do: Within 24h, lower your own LTV at least 5% below the new limit. Our 30% LTV strategy is almost always safe, but keep an eye on governance announcements.

Core rules

Never wait until the critical level. Act at the warning stage
Keep a cash reserve. The "Insurance Vault" should hold at least one Put cycle's cost
Document every action. What, when, why — for future analysis
Don't speculate during a crisis. Protection comes first, not "buying the dip"
Test the plan in advance. Use the scenario calculator before a crisis happens

With this table and five procedures you can now recognize any of the six situations within seconds and know the first step — that's a skill only those who prepared a plan in advance actually have.

The platform's planned role in a crisis

The DeFi Risk OS platform (in development) won't stop a crisis. But it will speed up your reaction. Instead of 20 minutes of hunting for information, the platform will show everything in one place and suggest actions based on your plan. Important: the platform will never buy or sell automatically. Every action will require your confirmation.

Next step: The next lesson — how all of this comes together in the platform.

Quick check

From what LTV level should you start reacting to a downturn situation?

Practice task

0 / 5

Write your personal crisis plan — 3 scenarios

A pilot writes the checklist on the ground, not while the engine is on fire. This task is your personal crisis checklist, written in calm conditions (~20 min, no trades).

Write the plan in CALM conditions, not during a crisis. Once the market is crashing — you stop thinking, you just execute. If you feel the urge to improvise during a crisis — that's emotion, not strategy.

This is learning, not investing — use only small amounts you treat as tuition.

You just prepared a written crisis protocol for three scenarios with time limits — that's how pilots and professional traders operate, not most investors, who meet a crisis by improvising.

Strategy B From learning to the platform

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