> ## Documentation Index
> Fetch the complete documentation index at: https://docs.ultramarkets.xyz/llms.txt
> Use this file to discover all available pages before exploring further.

# Vault Safety Mechanisms

> Multiple layers of protection ensure LP capital stays safe.

LP capital protection is our highest priority. We've built multiple layers of defense to ensure the vault stays solvent.

## Layer 1: No Gap Risk

The fundamental protection: **all positions close before event resolution.**

Prediction markets resolve to binary outcomes (0% or 100%). A 10x leveraged position at 90% that resolves to 0% would create catastrophic bad debt. We eliminate this entirely by exiting while markets are still trading probabilities.

## Layer 2: Early Liquidation

We liquidate positions when health drops to **45%**, not when they're already underwater. This means there's still equity remaining when we close, giving us room to execute the liquidation and recover the vault's capital.

## Layer 3: Market Selection

<Note>
  This is the most important safety mechanism. We only list markets with **predetermined resolution schedules** published well in advance.
</Note>

### Why Predetermined Schedules Matter

FOMC meetings are published one year in advance. Elections have fixed dates. Earnings calls are scheduled weeks ahead. When we know exactly when resolution happens, we can set force-close windows with confidence and eliminate surprise outcomes.

### What Makes a Market Safe for Leverage

| Criteria                     | Description                                        |
| :--------------------------- | :------------------------------------------------- |
| **Predetermined schedule**   | Resolution date is publicly known and fixed        |
| **No early resolution risk** | The event cannot resolve before the scheduled time |
| **Official source**          | Clear, authoritative oracle for resolution         |
| **Sufficient liquidity**     | Enough depth to execute positions cleanly          |

<Warning>
  Markets without predetermined schedules (breaking news, "will X happen by Y date") carry higher risk and may not be listed or may have lower leverage caps.
</Warning>

## Layer 4: Ultra Security Module (USM)

The USM is a separate insurance pool of staked ULTRA tokens that acts as first-loss capital.

### For USM Stakers

Earn enhanced yield from protocol revenue. In exchange, your staked ULTRA gets slashed first if bad debt occurs.

### For umUSD Holders

The USM provides a buffer protecting your capital. Before umUSD share price decreases from bad debt, staked ULTRA absorbs losses first.

<Card title="Two-Tier Protection System" icon="shield-halved">
  USM stakers take first-loss exposure for high returns, umUSD holders get protected lending returns.
</Card>

<Info>
  **Note:** The USM will go live with the ULTRA token launch. Until then, the first three layers provide protection.
</Info>