Every position pairs a perpetual future (trading 24 hours a day, every day) against a hedge leg — a stock or ETF via a traditional broker, which only trades during its own market's hours, roughly 9:30am–4pm in its local session, plus limited extended hours.

Most of the time this doesn't matter. But when an exit condition fires — funding flips sign, or spikes to an emergency level — and the hedge market happens to be closed, the strategy faces a choice: leave the perp leg open (continuing to bleed funding at whatever rate triggered the exit in the first place), or close what it can and accept a temporary unhedged gap.

This research always chooses the second option:

  1. The perp leg closes immediately, stopping the funding bleed the moment the trigger fires.
  2. The hedge leg is deferred to the next time its market opens. In the meantime, the position is genuinely naked — pure directional exposure to the hedge instrument's price, with no offsetting perp position at all.
  3. When the hedge market reopens, that leg closes at the first price the system can confirm is actually current (not a stale pre-open quote — a bug in this exact step, where a stale Friday close price got locked in as a Monday-open fill, was found and fixed on 2026-09-01).
  4. Whatever the hedge instrument's price did during that gap is booked as naked-leg P&L — uncorrelated with the funding thesis, pure coin-flip directional risk.

How big is this gap, normally?

Typically hours: an emergency trigger firing late Friday might defer the hedge leg until Monday morning, a 14–24 hour window. The project's Research Journal documents the range observed in practice.

When it goes wrong

The single largest loss in this project's history, on ARM, came from this exact mechanism combined with an operational failure: a 15-day monitoring outage turned what should have been a same-day gap into two weeks of unhedged exposure. See ARM: a 15-day outage, not a strategy failure. That incident is why staleness and stuck-naked-leg alerts exist today.

What this means for reading results

Every trade on the Lab Portfolio page shows separate close timestamps for each leg when they differ, with a naked-leg duration badge. This is deliberately not hidden inside a single "closed" timestamp.