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Risk Management & Hedging

Keep USDST vaults and liquidity positions safe through price swings, using the tools the app actually has.

What STRATO does not offer

The STRATO app has no short positions, perpetual futures, options, stop-loss or limit orders, conditional or automated orders, and no built-in price or liquidation alerts. Hedging on STRATO means managing debt, collateral and asset mix yourself, and monitoring your positions.

Know Your Liquidation Point

Liquidation on the Borrow page (USDST vaults, CDP) works per vault:

  • CR = collateral value at the oracle price ÷ debt (debt grows with the per-asset stability fee).
  • Health Factor (shown in the app) = CR ÷ the asset's liquidation ratio.
  • When Health Factor falls below 1.0, any other user can liquidate the vault. They repay part of the debt (capped by the asset's close factor and by the collateral left) and receive collateral worth that repayment plus a liquidation penalty, valued at the oracle price. There is no grace period or auction.

For a vault whose debt stays constant:

Price drop that triggers liquidation = 1 − 1 / Health Factor
Liquidation price                    = current oracle price / Health Factor

Because the stability fee keeps adding to debt, Health Factor drifts down slowly even when prices don't move.

Mechanics and screenshots: Mint USDST via CDP. General safety: Safety Guide.

Tool 1: Reduce Debt

The simplest and most reliable hedge.

  1. Borrow → your vault → Repay USDST (or Repay All USDST).
  2. Partial repays can't leave debt below the asset's debt floor. If they would, repay all.

To restore a target Health Factor h after a price drop d (as a fraction), with pre-drop collateral value C, debt D and liquidation ratio L:

Repay needed R = D − C × (1 − d) / (h × L)      (none needed if R ≤ 0)

Tool 2: Add Collateral

  1. Borrow → your vault → Deposit more of the same asset.
  2. Collateral only protects the vault for its own asset. Depositing ETH doesn't help a GOLDST vault.

Collateral value needed to reach target Health Factor h after the same drop:

Additional collateral value A = h × L × D − C × (1 − d)

Tool 3: Hold a Buffer Outside the Vault

Keep USDST (or the vault's collateral asset) in your wallet so you can run Tool 1 or Tool 2 quickly. Size it with the formulas above for the drop you want to survive.

Note

Minting extra USDST from a vault just to hold it as a buffer doesn't protect that vault. It raises the vault's debt by the same amount and lowers its Health Factor. A buffer works best when it comes from funds that aren't already borrowed.

Tool 4: Spread Collateral Across Vaults

Because each asset has its own vault, a sharp drop in one asset only puts that asset's vault at risk.

  • The Mint planner on Borrow can split a mint across several vaults at a target Health Factor.
  • The planner's aggregate Health Factor can hide one weak vault. Always check each vault in the vault list.
  • Each vault needs to meet its own debt floor and pays its own stability fee.
  • Diversification doesn't help when the assets fall together.

To move existing collateral between vaults, see Portfolio Rebalancing.

Tool 5: Reduce Volatile Exposure

  • Swap part of a volatile holding into USDST on Trade.
  • Metals: Fund → Buy Metals mints GOLDST or SILVST at the oracle price, less a mint fee. Metal tokens have their own price risk; they aren't stablecoins.
  • Liquidity positions: withdraw from volatile pools if you don't want impermanent loss. A V3 position that goes out of range ends up holding just one of the two tokens. See Provide Liquidity.

Monitoring Checklist

With no in-app alerts, set your own routine:

  • [ ] Each vault's Health Factor on Borrow (the app highlights values below 1.5)
  • [ ] Oracle prices of your collateral assets
  • [ ] Stability fee per vault (it compounds into your debt)
  • [ ] USDST and voucher balance for transaction fees (0.01 USDST or one voucher per transaction, charged even if it reverts). Running out blocks you from repaying or depositing.
  • [ ] V3 positions: in range or out of range (V3 Liquidity → My Positions)

Other Risks You Can't Hedge in the App

  • Oracle risk: vault health and liquidations use oracle prices, which can differ from pool prices on Trade.
  • Smart contract risk: contracts can have bugs; parameters and pause switches are controlled by the protocol's admins.
  • Bridge risk: assets bridged from other chains depend on the bridge. See Bridge Guide.
  • Liquidity risk: thin pools mean high price impact when you need to exit.

Next Steps

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