Margin, liquidation and ADL

This page covers how margin is computed on perpetuals, what happens when a position runs out of it, and the two backstops behind that — the insurance fund and auto-deleveraging. Options work differently and are covered at the end.

Initial and maintenance margin

Opening also reserves an estimated taker fee on top of IM, so the balance required to open is slightly more than IM alone.

Since maintenance is half of initial, the adverse move that exhausts a position is roughly 50% ÷ leverage:

All of it measured on mark price, not last trade.

Cross vs isolated

Isolated — each position carries its own margin. It publishes a liquidation price, computed directly from entry and leverage:

long:   entry − entry ÷ (2 × leverage)
short:  entry + entry ÷ (2 × leverage)

A liquidation consumes that position's margin and stops there.

Cross — all positions draw on one account balance. Capital efficiency is higher and offsetting positions do not each lock their own margin, but there is no per-position liquidation price (the API returns null for it, which is correct rather than missing): what gets liquidated is the account. A loss in one market reduces the buffer under every other position, so the number to watch is total account equity against total maintenance margin, not any single position.

What liquidation costs

When a position is liquidated, a penalty is charged on top of the loss. The default penalty is 1% of notional, capped at 40% of initial margin ÷ leverage — so the cap binds at high leverage:

Liquidation is not a fee-free unwind. Cutting a losing position yourself is almost always cheaper than being cut.

The insurance fund

Liquidations do not always close at the bankruptcy price — in fast markets they close worse. The insurance fund absorbs that shortfall so the winning side is still paid in full. It is funded by a share of trading fees and by liquidation penalties, and its balance is public.

Auto-deleveraging (ADL)

If the insurance fund cannot cover a shortfall, the exchange closes part of the opposing side instead. That is auto-deleveraging, and it is the last line of defence — it is how the venue stays solvent without socializing losses across everyone.

Who gets deleveraged first is not random. Priority is ranked by profit rate × leverage: the most profitable, most leveraged positions on the opposite side go first. Every position publishes its current adlRanking from 1 to 5, where 5 means you are at the front of the queue. If you are running a large, highly profitable, highly leveraged position, watching that number is part of managing it — and reducing leverage lowers it.

ADL events are published, so a position that was deleveraged can always be reconciled against the record.

Options

Options positions are not margined or liquidated:

• Long options — you paid the premium up front. That premium is your maximum loss, there is no liquidation price, and no margin call can reach you.
• Written options — collateral equal to the maximum payout was locked when the contract was sold, so the position is already fully funded to its worst case. Nothing further can be called.

This is why options are a clean way to take a bounded-risk view on the same underlyings the perp venue lists: the risk is known at entry and cannot grow.

Practical checks

• Watch account equity against maintenance margin in cross mode, and liquidation price in isolated mode.
• Raising leverage on an existing position raises the liquidation price toward the mark. Lowering it moves the liquidation price away — adding margin does the same.
• A take-profit/stop-loss pair protects a position without you watching it; the exchange monitors the trigger and closes at market.
• Reduce-only orders are always allowed, including during degraded equity sessions when opening is restricted.