Volatility is not a bounded quantity. An index that prints 62 can print 400 in the hour a major exchange halts withdrawals. A payout obligation with no ceiling is an insolvency waiting for the right Tuesday.
maxProfit = 8 × initialMargin- The cap is applied by the contract when a position closes, not approximated off-chain. A liquidation forfeits the margin instead, and releases the escrow.
- Worst-case liability is escrowed from the pool at execution time — the reserve exists before the move does. An order the pool cannot escrow is refused at open.
- Above the cap the position stops accruing profit but keeps its collateral; it is never force-closed for being too profitable.
- Traders see the exact payout ceiling on the ticket before they sign. No discovery at settlement.