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Leverage risk

Leverage amplifies price moves. A small adverse move can quickly reduce position value and health.

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Liquidation risk

If your health ratio falls below the liquidation threshold, anyone can liquidate the position. You may receive less than expected or lose the full position value. A liquidation also charges the same close fee a voluntary close pays. That fee is carved out of your adjusted worth first, before the liquidator incentive and any residual escrowed back to you — so being liquidated does not let you skip the close fee.

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Settlement claim risk

Proceeds are not always credited to your wallet automatically. For an ordinary (non-cross-margin) position, the payout from a close or a liquidation is escrowed in the pool and requires a separate claimSettlement transaction to withdraw. Only cross-margin proceeds credit your account directly. Until you claim, the collateral sits as pending settlement and is not in your wallet.

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Psi risk

Psi is a solvency adjustment, not a fee, and you do not choose it. Your adjusted worth is the raw price-move result scaled by psi at open ÷ current psi (psi is floored at 1, never below). So psi can cut or lift your value relative to the raw move, depending on how the pool’s psi has changed since you opened: if current psi is higher than it was at open, your adjusted worth shrinks below the raw result; if it is lower, your adjusted worth rises above it. Your payout is not a simple entry-price-to-current-price calculation. The pool cannot pay more collateral than it holds. In stressed states, rising psi can cut your payout and health below what the raw price move implies — even when the oracle has moved in your favor.

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Oracle execution risk

Your transaction uses the oracle price available to the contract when it executes. Displayed prices can become stale before confirmation.

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Market state and availability risk

A guardian or risk role can pause a market (everything except claimSettlement stops) or set it reduce-only (only risk-reducing actions remain). These controls protect users during incidents, but they can temporarily block your exit, and unpausing does not clear reduce-only. Markets bound to a trading calendar (such as stock-index markets) block opening and new liquidity while scheduled closed and during a short reopen grace after each open. Closing, reducing, and liquidation stay available, but positions are valued at a frozen oracle price while closed, funding keeps accruing, and the price can gap when trading resumes. On L2 markets the oracle also enforces sequencer liveness (mandatory on Base mainnet). While the sequencer is down, and for a grace period after it restarts (one hour by default), every price-reading action reverts, including closing and liquidation. Already-escrowed settlement can still be claimed.

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Funding

TACO price markets do not use the traditional long/short funding loop, so funding does not rebalance long and short demand the way it does on a standard perpetual. However, a market can enable an optional trader-to-LP funding charge (off by default). When it is enabled, traders pay funding into the LP pool — the crowded side pays a premium and the minority side gets a discount — and it is taken from your margin, reducing your payout and health. Check a market’s funding setting before holding a leveraged position.

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LP pool risk

Price LPs back a shared pool. Trader wins, liquidations, oracle moves, and pool accounting can all affect LP withdrawal value. LP exposure is bounded by committed collateral, but the withdrawal value of that collateral can still fall.