Catastrophe stop: hard backstop for a missing/non-firing protective stop

Diagnosis (why-strategy-loses-naked-stop): the net loss is ONE naked-stop blowup
— NIVF ran to -23% with no stop that fired (-$3,737 = ~111% of the loss); ex-NIVF
the book is +$380. And the exit manager SKIPS any position without a usable stop
(line ~160), so a naked position gets zero exit management and runs to EOD.

New catastrophe stop runs FIRST and unconditionally on every held position,
before the bars fetch and before that no-stop skip: market-exit (via the robust
cancel-legs-then-close path) when price is >= catastrophe_pct below entry (def
10%, TRADING_CATASTROPHE_STOP_PCT) OR >= catastrophe_risk_mult x the intended 1R
underwater when a stop is known (def 1.5x). Independent of the broker bracket, so
a missing/failed stop can't run to -23% again. Long-only; in-profit and bad-price
are no-ops; 0 disables.

Validated: would have CAUGHT NIVF at -10% (~-$1.6k vs -$3.7k), leaves normal -1R
stops (BTBT -4.2%) alone. Pure `catastrophe_triggered` + manage() wiring +
`_is_active`/describe updated. Tests cover pct arm, risk arm, in-profit, disabled.

Co-Authored-By: Claude Opus 4.8 <noreply@anthropic.com>

runtime/exit_manager.py

@@ -20,7 +20,7 @@ import pandas as pd
 
 from runtime.flatten import cancel_protective_and_close
 from storage.event_schema import EventMode, RiskRuleTriggeredEvent
-from strategy.exits import ExitConfig, TRAIL_NONE, manage_live
+from strategy.exits import ExitConfig, TRAIL_NONE, catastrophe_triggered, manage_live
 
 logger = logging.getLogger(__name__)
 
@@ -38,7 +38,7 @@ def _is_active(cfg: ExitConfig) -> bool:
     return bool(cfg and (cfg.breakeven_at_r or cfg.breakeven_at_pct
                          or cfg.trail_mode != TRAIL_NONE
                          or cfg.scale_out_r or cfg.first_red_exit
-                         or cfg.profit_lock_tiers))
+                         or cfg.profit_lock_tiers or cfg.catastrophe_pct))
 
 
 class LiveExitManager:
@@ -146,13 +146,36 @@ class LiveExitManager:
 
         actions: list[str] = []
         for sym, p in held.items():
+            entry = float(p.get("avg_entry_price") or 0.0)
+            cur = float(p.get("current_price") or 0.0)
+            # CATASTROPHE STOP — the hard backstop, FIRST and unconditional. Runs on
+            # EVERY held position, before the bars fetch and before the no-stop skip
+            # below that otherwise leaves a NAKED position (no working bracket) with
+            # zero exit management — the exact NIVF case that ran to -23% and was
+            # ~the entire net loss. Doesn't depend on bars or a live stop.
+            if (self.cfg.catastrophe_pct and entry > 0 and cur > 0
+                    and str(p.get("side") or "long").lower() != "short"):
+                _leg0, cata_stop = self._stop_leg(sym, orders)
+                if catastrophe_triggered(entry, cur, cata_stop,
+                                         self.cfg.catastrophe_pct,
+                                         self.cfg.catastrophe_risk_mult):
+                    loss_pct = (entry - cur) / entry * 100
+                    try:
+                        self._flatten(sym, orders)
+                        self._tracked.pop(sym, None)
+                        self._emit(sym, f"CATASTROPHE exit {sym} @~{cur:.4f} "
+                                   f"({loss_pct:.1f}% below entry)", "exit_catastrophe",
+                                   {"price": cur, "entry": entry, "stop": cata_stop})
+                        actions.append(f"{sym} CATASTROPHE-exit @{cur:.2f} (-{loss_pct:.0f}%)")
+                    except Exception as exc:  # noqa: BLE001
+                        logger.warning("catastrophe exit failed %s: %s", sym, exc)
+                    continue
             try:
                 bars = self.bars_fn(sym)
             except Exception:  # noqa: BLE001
                 continue
             if bars is None or len(bars) == 0:
                 continue
-            entry = float(p.get("avg_entry_price") or 0.0)
             if entry <= 0:
                 continue
             if sym not in self._tracked:

strategy/exits.py

@@ -70,6 +70,13 @@ class ExitConfig:
     # trade has been up gain%, the stop never sits below entry*(1+lock%) — so a
     # winner can only give back down to a locked-in minimum gain.
     profit_lock_tiers: list = field(default_factory=list)
+    # CATASTROPHE STOP — a hard market-exit backstop that does NOT depend on the
+    # broker bracket stop being live. Fires when price is >= catastrophe_pct below
+    # entry, OR (when a stop is known) >= catastrophe_risk_mult x the intended 1R
+    # underwater. Catches a missing/failed protective stop (NIVF ran to -23% naked,
+    # = the entire net loss). 0 = off.
+    catastrophe_pct: float = 0.10
+    catastrophe_risk_mult: float = 1.5
 
     @classmethod
     def from_env(cls, env: dict | None = None) -> "ExitConfig":
@@ -97,6 +104,8 @@ class ExitConfig:
             scale_out_pct=f("TRADING_EXIT_SCALE_OUT_PCT", "0.5"),
             first_red_exit=b("TRADING_EXIT_FIRST_RED", "0"),
             profit_lock_tiers=parse_profit_tiers(v.get("TRADING_EXIT_PROFIT_TIERS", "")),
+            catastrophe_pct=f("TRADING_CATASTROPHE_STOP_PCT", "0.10"),
+            catastrophe_risk_mult=f("TRADING_CATASTROPHE_RISK_MULT", "1.5"),
         )
 
     def describe(self) -> str:
@@ -115,9 +124,30 @@ class ExitConfig:
         if self.profit_lock_tiers:
             parts.append("lock " + "/".join(
                 f"+{g * 100:g}%->{lk * 100:g}%" for g, lk in self.profit_lock_tiers))
+        if self.catastrophe_pct:
+            parts.append(f"catastrophe@-{self.catastrophe_pct:.0%}/{self.catastrophe_risk_mult:g}xR")
         return ", ".join(parts)
 
 
+def catastrophe_triggered(entry: float, current: float, stop: float | None,
+                          pct: float, risk_mult: float) -> bool:
+    """True if a LONG position is catastrophically underwater and must be
+    market-exited NOW regardless of the broker bracket — the hard backstop for a
+    missing or non-firing protective stop. Fires when price is >= ``pct`` below
+    entry, OR (when a real stop is known) >= ``risk_mult`` x the intended 1R
+    risk underwater. ``pct`` <= 0 disables the percentage arm."""
+    if not entry or not current or current <= 0 or entry <= 0:
+        return False
+    loss_frac = (entry - current) / entry           # >0 = underwater (long)
+    if pct and pct > 0 and loss_frac >= pct:
+        return True
+    if stop is not None and stop < entry and risk_mult and risk_mult > 0:
+        risk = entry - stop
+        if risk > 0 and current <= entry - risk_mult * risk:
+            return True
+    return False
+
+
 @dataclass
 class ExitFill:
     frac: float   # fraction of the original position closed by this fill

tests/unit/test_exits.py

@@ -10,6 +10,7 @@ from strategy.exits import (
     ExitConfig,
     TRAIL_PCT,
     TRAIL_PRIOR_LOW,
+    catastrophe_triggered,
     manage_live,
     parse_profit_tiers,
     simulate_exit,
@@ -21,6 +22,28 @@ def test_parse_profit_tiers():
     assert parse_profit_tiers("") == []
 
 
+def test_catastrophe_pct_arm():
+    # 10% pct floor, no known stop -> the only thing protecting a naked position
+    assert catastrophe_triggered(1.00, 0.89, None, 0.10, 1.5) is True   # -11%, fires
+    assert catastrophe_triggered(1.00, 0.92, None, 0.10, 1.5) is False  # -8%, safe
+    # NIVF: entry 0.9936 ran to 0.76 (-23.4%) with NO stop -> would have fired
+    assert catastrophe_triggered(0.9936, 0.7608, None, 0.10, 1.5) is True
+
+
+def test_catastrophe_risk_arm_fires_before_pct():
+    # tight 5% stop: -1.5R = -7.5% < the 10% pct floor, so the risk arm catches it sooner
+    assert catastrophe_triggered(1.00, 0.92, 0.95, 0.10, 1.5) is True    # past -1.5R (-1.6R)
+    assert catastrophe_triggered(1.00, 0.93, 0.95, 0.10, 1.5) is False   # -1.4R, not yet
+    # a stop at/above entry is not a usable risk reference -> only the pct arm applies
+    assert catastrophe_triggered(1.00, 0.94, 1.00, 0.10, 1.5) is False
+
+
+def test_catastrophe_off_and_in_profit():
+    assert catastrophe_triggered(1.00, 0.50, None, 0.0, 1.5) is False    # pct arm disabled, no stop
+    assert catastrophe_triggered(1.00, 1.20, 0.95, 0.10, 1.5) is False   # in profit
+    assert catastrophe_triggered(1.00, 0.0, None, 0.10, 1.5) is False    # bad price -> no-op
+
+
 def test_profit_lock_keeps_minimum_gain():
     # entry 10, stop 9. price runs to +12% (11.2) then fades; +8%->lock+3% tier
     # pins the stop to 10.30, so the fade exits in profit instead of at the stop.