MENTAT
← funding arb · catalog

day 5 of 5

Going live

Risk checklist, kill switches, what to do when funding flips, when to close.

<!-- SKYTO: review/edit before publishing -->

You've watched paper-mode for 7 days. Now we make the irreversible step: real capital, real fills, real liquidation risk. Don't read this lesson once and start trading. Read it twice.

Pre-flight checklist

Before you flip the switch from paper=True to paper=False in your agent's config:

□ Paper-mode P&L was positive over 7 days (gross funding > all frictions)
□ I observed at least one funding-rate flip during the paper window
□ I observed how the agent reacted — did it close cleanly or stall?
□ Daily PnL caps are wired with concrete numbers
□ Telegram alerts are reaching me within 60s (test by triggering one manually)
□ I have a manual kill command I can send if the agent freezes
□ Withdrawal-route practice: I successfully withdrew $50 from each venue
□ My agent's keys are in TEE storage, not in plaintext on a server

Kill switches that actually save you

1. Funding flip persistence. If funding moves against you for 3 consecutive intervals (3 hours on HL), close. The strategy depends on funding paying you; if it stops, your edge is gone. Don't wait for "mean reversion" — that's a hope, not a strategy.

2. Daily PnL hard floor. -1.5% of allocation is the standard. Below it, close everything and wait 24h. This catches: oracle blowups, liquidation cascades, slippage events on close.

3. Liquidation buffer minimum. If your perp leg's liquidation distance drops below 15% (price moved against you faster than the hedge could rebalance), close the perp first, then unwind spot at your own pace.

4. Single-venue concentration. If >70% of your capital ends up on one venue (because funding diverged hard), pause new entries until you've redistributed. FTX-2025 wasn't that long ago.

5. Manual override. A single Telegram command — /close-all — that the agent honours within 5 seconds, no questions, no retries, no LLM judgment. Boring, important.

Going live, week 1

Cap your allocation at $1,000 for the first week of live trading regardless of how confident paper-mode made you feel. Watch the position. Take notes on:

  • How does fill price compare to the model price the agent predicted?
  • Are the funding accruals matching your computed rate?
  • Does the agent's "close" path work cleanly, or does spot leg lag perp?

Every one of these is something paper-mode can hide.

When to close, in plain English

Close when funding flips. Close when daily loss hits the floor. Close when you're unsure why something happened. Closing is cheap; conviction is expensive.

The graduates who run this strategy long-term close more often than they enter. They sit on the sideline more than they're in trades. The arb is intermittent; the patience is constant.

You're done

If you finished day 5, you have everything you need to run a delta-neutral funding-arb agent on real capital. You also have everything you need to not run one and use the same setup for any future paid course in the catalog.

Drop into Day 8 if you want to share what you've built. The Mentat curriculum doesn't end here — it just gets harder.

quiz · 3 questions

Q1. The first kill switch you should wire on a live funding-arb agent is:

  1. Stop-loss on the spot leg
  2. Daily PnL hard cap
  3. Position close if funding flips against you for 3 consecutive intervals
  4. Withdrawal trigger on cold-wallet movement

explain → Funding flipping for multiple consecutive intervals is the canonical regime-change signal — your edge is gone, exit before the carry inverts.

Q2. On a $20K position, what's a safe daily-loss kill switch?

  1. 0.1% of capital ($20)
  2. 1-2% of capital ($200-400)
  3. 10% of capital ($2,000)
  4. No kill switch — funding-arb is delta-neutral

explain → Delta-neutral != risk-neutral. Liquidations, slippage on close, oracle dislocations all hit. 1-2% gives breathing room without bleeding.

Q3. When funding flips negative, the correct first action is:

  1. Double down — funding mean-reverts
  2. Close the position and watch from the sideline
  3. Switch sides — long perp, short spot
  4. Wait one more cycle

explain → Closing first, observing second is the strategy's discipline. The 'switch sides' trade exists but it's a separate strategy with separate risks.

homework

Write down the exact kill-switch rules for your agent. Be specific: thresholds, intervals, actions. This is what your future self will need at 3am.

1. Daily PnL < -1.5% → close all positions
2. Funding flips for 3 consecutive 1h intervals → close position on that asset
3. ...

Homework is acknowledged, never graded — do it for yourself.