# Risk Considerations and Security

When using Gauntlet’s Vault strategies, vault users should understand several key risk categories:

**Market Risks.** Price volatility in underlying assets and fluctuations in funding rates can significantly affect returns. Liquidity may dry up during high-volatility periods, and correlations between assets can break under stress. These factors require careful position sizing and robust risk management.

**Operational Execution.** Execution slippage, especially in less liquid markets or during volatility spikes, can erode profits. Transaction timing is often critical, and even rare system downtime must be considered. Integrating multiple protocols demands thorough testing and meticulous attention to detail.

**Smart Contract and Protocol Risks.** Upgrades and parameter changes can introduce new vulnerabilities. Despite third-party audits, users remain exposed to smart contract failures, market volatility, and potential socialized losses.

**Leverage and Hedging Risks.** Some strategies use leverage, which amplifies both gains and losses. Position management errors, hedging delays due to limited liquidity, fluctuating borrowing costs, and liquidation during extreme market conditions are key concerns. The hedged vault may also face data or execution errors, inadequate liquidity on Drift for full delta hedging, and liquidation risk on hedge positions during periods of high volatility.

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[Please read Gauntlet’s full disclosures here](https://www.gauntlet.xyz/drift-hjlp-vault-disclaimer).<br>
