> For the complete documentation index, see [llms.txt](https://references.everstrike.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://references.everstrike.io/trading/deleverage-events.md). # Deleverage Events Understand when deleveraging occurs and how Everstrike selects affected counterparties. A Deleverage Event limits losses when normal liquidation cannot resolve a bankrupt position. It closes selected counterparty positions instead of applying a loss across all profitable traders. Read [Liquidation](/trading/liquidation.md) and [Liquidity Providers](/trading/liquidity-providers.md) for the preceding risk controls. ### When deleveraging occurs A Deleverage Event occurs only when all of these conditions apply: 1. A position reaches its Bankruptcy Price. 2. The position cannot be sold at that price. 3. No Liquidity Provider takes over the position. 4. The Insurance Fund cannot cover the resulting loss. Fast-moving markets can prevent a liquidation order from filling. A lack of opposing liquidity can also prevent a sale at the Bankruptcy Price. Incremental liquidation and [Risk Limits](/trading/risk-limits.md) reduce the likelihood of this outcome. They cannot eliminate it during extreme market conditions. ### How deleveraging works A Deleverage Event automatically closes the bankrupt position at its Bankruptcy Price. The system then selects one or more counterparties and closes their positions. This differs from socialized loss, where losses are distributed among profitable traders. ### Counterparty selection The system prioritizes counterparties with high leverage and high profit. A higher score increases the likelihood of selection: `Selection Score = Leverage × Position Size × Return on Equity (ROE)` Where: * `Leverage` is the leverage applied to the position. * `Position Size` is the position's notional size. * `ROE` is the position's Return on Equity. ### What you will see Deleverage Events appear in your trade history. If the system selects you, Everstrike also sends a detailed email notification. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation by asking a question. Perform an HTTP GET request on the following URL with the `ask` and `goal` query parameters: ``` GET https://references.everstrike.io/trading/deleverage-events.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is what the user is ultimately trying to achieve, the reason they need the answer. Sharing it helps GitBook give you a better, more relevant answer. A goal is most helpful when it describes the outcome the user wants rather than restating the question. For example, with `ask=how do I create an API token`, a goal like `automate deployments from our CI pipeline` lets GitBook tailor the answer to that use case. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.