ADL is a relic of isolated margin systems copied from @BitMEX. It doesn’t work for options, and at best is a terrible experience for cross-margin users. Paradex deliberately chose not to implement ADL. It breaks cross-platform hedges, adds a lot of unpredictability to users’ risk management, and fails for complex assets and portfolio-margin setups. There’s also no guarantee of finding profitable ADL counterparties under cross margin, without further amplifying liquidations. @DeribitOfficial also operates without ADL. Socialized loss (SL) is a far better experience for users and scales easily to more complex assets and margin types 👇 Portfolio-Level Integrity ADL operates at the single-market level, without considering the user’s overall account exposure. The trader who is high on the ADL queue due to a highly profitable/leveraged position on one market isn't necessarily profitable on an account level. Example: BTC = $100,000, ETH = $4,000 Insurance Fund (IF) = $100,000 collateral + short 40 BTC perps. Alice has a $4M BTC-ETH spread on, i.e. +40 BTC perps (long) and –1,000 ETH perps (short) → Both BTC and ETH rally +5% → BTC to $105,000, ETH to $4,200. Under a normal scenario, Alice’s BTC and ETH positions offset, leaving her with flat PnL. But the insurance fund’s bankruptcy price is $102,500. To protect the fund, ADL is triggered and forces Alice’s BTC leg to be closed at $102,500 as it cannot afford a loss that is higher than $100,000. Alice realizes BTC profits based on a 2.5% move while her ETH short continues to lose 5%, leaving her with a $100,000 loss. This can, in theory, lead to an unfair liquidation of Alice's account. "Ethena" Risk The same is true for a trader that could be holding the opposite position on a different exchange. If the position is subject to ADL, it closes the profitable leg, leaving the user with a naked losing leg. This destroys the intended hedge and amplifies risk exposure. @ethena smartly negotiated this provision away for it's trading on CEXs but that now means the risk of ADL is being unfairly borne by the exchange's other users. Smart for Ethena but not scalable for the exchange. Given the potential market exposure imposed on affected accounts, ADL often triggers a forced unwind of positions, leading to fire-sale behavior that further amplifies market volatility and erodes liquidity. This mechanism is particularly unsuitable for exchanges with options, where users frequently hold multiple correlated instruments on the same underlying asset for hedging or risk-neutral strategies. In such environments, forcibly closing a single profitable leg through ADL can break portfolio hedges, destabilize the portfolio and, by extension, the market. To our knowledge, NO EXCHANGE discloses how cross-instrument exposures are handled under ADL. Conditional + Reversible Under a SL mechanism, losses are conditional, deferred (not immediately realized) and give users a choice. They are applied only upon withdrawal, and only if the platform is still experiencing a solvency deficit at that time. If the market rebounds, or if the insurance fund grows (either through profitable liquidations or additional allocations) and covers the deficit, the shortfall is erased and no SL is applied. By contrast, ADL crystallizes losses instantly and doesn’t give the user a choice. If a sudden market move causes insurance fund depletion, the system immediately closes profitable positions via deleveraging. Those users now permanently lose their realized profits. SL introduces time, and recovery potential into the loss-allocation process while giving users a choice. It penalizes only those who exit during insolvency, while long-term users benefit if solvency is later restored. Fair + Predictable Risk Distribution ADL targets specific traders (often highly leveraged and profitable ones), forcibly closing their positions to cover the platform shortfall. It penalizes traders for system-level insolvencies outside their control. SL by comparison avoids arbitrary targeting and maintains fairness. All users share the risk evenly and only when a persistent shortfall exists. Transparency ADL is a complex, queue-based mechanism that is very hard to anticipate for users. In contrast, a SL adjustment is a simple, transparent function of the insurance fund shortfall relative to the platform’s TVL. As it affects users only when they withdraw, it ensures predictability and transparency in the loss allocation. Compute Efficient = "Chain Friendly" SL simplicity makes it straightforward to implement on-chain in a trustless manner. There is less compute complexity which means cost and throughput constraints are alleviated. ADL’s dynamic queue logic is computationally heavy as it requires scanning all accounts on the platform, making it very expensive and error-prone. It also adds congestion to a system that is likely to already be congested when ADL is triggered. October 10 = Wake Up Call If your CEX can’t guarantee portfolio integrity under stress, it’s the architecture that’s broken. Switch to DEXs with intelligent loss-allocation that protects hedges, distributes risk fairly while staying conditional and predictable. Paradexio

This 👇

this trader would have saved $1500 on spread and fees if he traded this on Paradex help a bro out... tell him about @paradex

want to know if an exchange is really liquid? wait for volatility (like today) MMs pull quotes faster than you can blink this is where RFQ shines screen or no screen, get a price on demand RFQ = always open 👇

fuck so much alpha packed in ~30 mins!!! if you are serious about trading options this is a MUST watch every week! set 30 mins aside to hear from the best with @dlawant, gReg , @0x_tiago and @minus1_12 !

this

RFQ traders on @paradex saved ~$140k last month and the reason is simple - retail pays zero on Paradex. start contrast to the research making the rounds earlier this week that ~400k retail wallets trading on HL are down $280m..... with over half of those losses went to fees, not trades!! these two trends are inevitable. the more retail loses to fee drag, the more it hurts retention and the more activity moves to zero fee platforms.

majors liquidity on options has improved 10x in the last month making us the most liquid place to trade options on chain. but its not just majors... as @domdosu reminded me yesterday, our alts orderbooks also starting to look really good. still small size but this is just a glimpse of what is to come... i expect several orders of magnitude improvement in the coming weeks!

Reminder that you DON’T need to split your trading across multiple accounts you just need BETTER tech ❤️ trade 100+ assets from one unified account on @paradex

agree

vol compressing is a function of the market maturing. this is also. a huge structural reason for why options take time to mature. when vol is high it makes insurance very expensive so it means less buyers and it is then generally a seller driven market for the first few years. then once vol gets sold off the buyers step in the latter years and then the market really explodes volume wise. every other alt asset will follow this trend!

🔥🔥

GODLIKE!!!! 💥💥💥💥💥 LARGEST TRADE IN PARADIGM'S HISTORY!!

PSA this taker would have saved $1600 in fees we put money back in yo pocket trade on @paradex 😂

great to see more platforms also share our notion that block flow has immense alpha!! well done @derivativemonky! pls keep the updates coming!

even the pros like @Halcyon_Waters agree serious option traders need option monitor on their desktop!! 👉 app.paradex.trade/option-mon…

calling all options arb0ooors. paradex prices are often significantly better than the price on other exchanges. free arb for anyone that can park capital on both venues. all you need to do is RFQ on both venues and pocket the difference you're welcome ❤️

ETH calendar roll guy @paradex would have saved u $500 in spread and fees someone pls tell this guy he's giving away free money

if it isn't clear by now fees are the enemy of retail good news is there is a solution @paradex

the Gigavault is quietly paying you 10% on the back of some options yield!! you know what to do!

if you call yourself a serious options trader you NEED the Block Trade Monitor on your desktop @0xEvinho explains why 👇