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Modulis 6 · Strategies
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Crisis playbooks

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

SituationWhen to reactUrgencyWhat to do
DownturnLTV >= 45% or price -20%CriticalSell the Put, close the LP, stabilize
JumpPrice +15-20%MediumRoll the Put strike up
Mega jumpPrice +100%LowAccept the Call assignment, USDC to the vault
LP asleepPrice < LP lower boundMediumMove or close the LP
Options expiring< 30 days leftMediumPut roll window
Coverage < 1.0xLP earnings < breakevenMediumReduce 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

  1. Pause and assess. Is this a short-lived jolt (flash crash) or a real downturn? If unclear — treat it as a downturn

  2. 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

  3. Close the LP position. The LP has already converted part of the USDC into SOL. Close it and take the remaining capital

  4. Repay part of the debt. Use the proceeds to reduce the debt. Target: LTV below 35%

  5. Wait for stabilization. Once the price stops falling (2-3 days), restart the strategy

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

ActionAmountEffect
Put profit+$1,800Offsets the loss
LP closed~$2,900Returns capital
Debt repaid-$3,000LTV 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%):

Action plan

  1. 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)

  2. Move the LP range. Close the old range ($64-$88), open a new one ($84-$105). The LP earns again

  3. Assess the Covered Call. If the $160 Short Call is still far away — leave it

  4. Accept the loss on the old Put. The old Put may be nearly worthless — sell it for whatever residual value remains

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

Situation 3: Mega jump (+100%)

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

What happens

  1. Accept the assignment. Selling 50 SOL at $160 = an 82% gain. That's a good outcome

  2. The USDC goes into the "Insurance Vault." $8,000 — a large buffer

  3. Repay the full debt. From the $8,000, repay the 4,704 USDC debt. ~$3,296 remains

  4. Restart. Start a new cycle with 76 SOL and $3,296 USDC

PositionBeforeAfter assignment
SOL126 SOL76 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 happeningWhat to do
Price only slightly below rangeWait 24-48h — it may come back
Price well below rangeClose the LP. Move the SOL to collateral
Price returnsNothing — 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!

  1. Assess the cause. Did LP earnings drop because of low trading volume, or a range problem?

  2. If it's a volume issue: wait 1-2 weeks. Trading volume fluctuates

  3. If it's a structural issue: reduce the options cost — narrow the spread or sell an additional Short Put

  4. If it's long-term: restructure the strategy with lower costs

Warning levels

LevelLTVColorWhat to do
Normal< 45%GreenWeekly cycle
Warning45-55%YellowPrepare the crisis plan
Danger55-65%OrangeReduce the debt
Critical> 65%RedUrgent debt repayment
Liquidation> 71%BlackThe protocol liquidates automatically

Edge cases

Deribit unreachable

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

What to do:

  1. Immediately: close the LP position via Jupiter — get USDC
  2. Within 1h: repay part of the debt, lower the LTV
  3. 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:

  1. Within 30 min: STOP, do nothing, assess whether this is panic or a fundamental event
  2. Within 1h: close the LP (it has converted into 100% SOL)
  3. Within 2h: sell the Put options (now in profit — this is your insurance source)
  4. Within 4h: repay the debt from the Put profit
  5. 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

  1. Never wait until the critical level. Act at the warning stage
  2. Keep a cash reserve. The "Insurance Vault" should hold at least one Put cycle's cost
  3. Document every action. What, when, why — for future analysis
  4. Don't speculate during a crisis. Protection comes first, not "buying the dip"
  5. 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 role in a crisis

DeFi Risk OS doesn't stop a crisis. But it speeds up your reaction. Instead of 20 minutes of hunting for information, the platform shows everything in one place and suggests actions based on your plan. Important: the platform never buys or sells automatically. Every action requires 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
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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 BFrom learning to the platform