Figure 6 — Yodacom Research · LPIS Series · 2026-06-15
Contingency Range: It Earns on a Slow Drift — Not on a Crash
Two price path scenarios · Primary LP range + contingency range (pre-set below lower band) · RXI gating determines when contingency deployment is appropriate
Scenario A — Slow Drift Below Band · Contingency Range Earns
+40% Entry −30% −51% PRIMARY RANGE — earning fees CONTINGENCY RANGE — earns on slow drift Primary LP earns fees Contingency LP earns fees RXI still reads RANGING Mean reversion Hurst<0.5 · ADX<20 Time (weeks)
Outcome: Contingency range earns
Price consolidates below primary lower band for several weeks. RXI continues to read RANGING (Hurst <0.5, ADX <20). Contingency LP captures fee income during the consolidation period. Capital in idle primary position is not entirely lost — contingency position is productive.
Condition for this outcome: RXI regime signal remains RANGING after price exits primary band.
Scenario B — Sharp Crash · Contingency Range Does Not Help
+40% Entry −30% −51% PRIMARY RANGE CONTINGENCY RANGE BELOW ALL RANGES — both positions idle + IL Primary LP: fees accruing ~1 week transit Both positions below range IL accumulating on full crypto position RXI fires: TRENDING Time (weeks)
Outcome: Contingency range earns almost nothing
Price crashes straight through the contingency band in approximately 1 week. Fee income from ~1 week at 30% gross APY: ≈0.6% of capital. Meanwhile, IL on primary position (out of range, fully in crypto) is accumulating. RXI fires TRENDING — if contingency was auto-deployed at the lower-band breach, it was a loss-amplifying second position, not a hedge.
This is why the contingency range must be RXI-gated independently. The breach of the primary lower band does not itself justify deploying the contingency.
RXI-gated contingency deployment logic (proposed, architecturally implementable with existing FuzzyBoundaryController)
IF RXI = RANGING (Hurst <0.5 AND ADX <20): deploy contingency range below primary band → await mean-reversion
IF RXI = TRENDING (Hurst >0.6 OR ADX >25): do NOT deploy contingency; exit primary range; hold USDC
IF RXI = TRANSITIONAL: hold; reassess next week; do not deploy contingency
Critical clarification: The contingency range is NOT a hedge. If price falls below the primary band AND below the contingency band, both positions accumulate IL simultaneously — the maximum drawdown is additive, not reduced. The contingency position is a second bet in the same directional regime. It earns only when price consolidates below the primary band in a ranging market; it does not protect against a continuing downtrend.
Mechanism disclosure: Contingency range diagram is illustrative — price paths are representative of the two described scenarios (slow drift vs. sharp crash), not derived from specific simulation outputs. Fee income estimate during 1-week contingency transit: 30% gross APY × 1/52 weeks = ~0.58% of LP capital deployed in contingency position. Contingency range RXI-gating logic is architecturally proposed in RES-LPIS-OPTIMIZE-01, Section 2d, as a parameter extension of the existing FuzzyBoundaryController — it requires one new output variable (contingency-range-deploy signal, 0–1) and is not currently implemented in production. The statement that RXI correctly identifies ranging vs. trending conditions approximately 73–85% of the time is based on Type I/II error rate parameters used in the simulation (15% Type I, 12% Type II). The contingency range concept should not be presented as a "hedge" or "downside protection" — it is a conditional income capture on a slow-drift consolidation below the primary range.