Profitability vs Risk: Gas & Budget Caps That Work

Principles

• Cap downside first; size upside gradually.
• Use canary sizes on new routes.
• Track realized vs target slippage and cost.

Simple calculator mindset

Expected value makes sense only with bounded losses. Model costs and variance explicitly and stop when assumptions break.

Step-by-step budgeting

1. Baseline costs: Run the Gas Calculator with conservative inputs.
2. Define per-trade caps: Limit gas + slippage per attempt; log them in Ops Pulse.
3. Session budget: Set a USD ceiling per route so one strategy cannot drain the desk.
4. Refund guard: Enable FRB’s refund policy to pause after a configurable number of misses.

Canary sizing formula

Start with 10% of the intended allocation. After 50–100 successful fills and documented review, increase to 25%, then 50%, etc. If refunds spike or inclusion drops, fall back to simulation until metrics recover.

Reporting template

• Daily: summarize spend vs refunds vs profit.
• Weekly: highlight parameter changes, include links to /metrics and relevant chain guides.
• Monthly: revisit assumptions, adjust budgets, and archive notes to the Knowledge Base.

Sensitivity worksheet

Keep a table like this in every playbook so you know exactly when to pause.

FAQ

How do I pick initial caps?
Use historical volatility plus a 2× safety buffer; update as real data arrives.

Should caps differ per chain?
Yes. Each chain’s gas behavior and liquidity differ—copying numbers blindly invites losses.

When should I pause a route?
Immediately after three consecutive losses beyond budget, or whenever refund guard triggers a stop.

Who signs off on changes?
Route owner proposes, risk lead reviews, compliance archives the decision. Document names plus timestamps inside the Knowledge Base entry linked to this article.