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Calculation of Futures Liquidation

  • Updated
Futures liquidation is when the account equity of a position (i.e. the value of the position plus the available balance) falls below a certain liquidation line, the system of the futures will automatically close the position to protect the interests of the trading platform and other users. The liquidation line is calculated based on the leverage multiple of the position and the fluctuation of the futures price. The following is the method for calculating the liquidation of futures of Astral Exchange:
  1. The formula for calculating the liquidation price in the long position mode:
Liquidation price = (open value - initial margin + fee - additional margin) / ((1 - maintenance margin rate) * contract multiplier * number of contracts)
 
Initial margin = contract multiplier * open quantity * open price / leverage (USDT)
 
Open value = open price * contract multiplier * open quantity (USDT)
 
Maintenance margin rate = Maintenance margin rate of the corresponding position
  • Calculation example:
Suppose Astral Exchange offers a BTC/USDT contract with a contract multiplier of 100, the current price of BTC is 40,000 USDT, the user buys 10 contracts with 10 times leverage, the open price is 40,500 USDT, the open fee is 0.1% and the maintenance margin rate is 0.5%. Then, the following steps can be followed to calculate the liquidation price:
  • Calculate the initial margin
Initial margin = contract multiplier * open quantity * open price / leverage
= 100 * 10 * 40,500 / 10
= 4,050,000 USDT
  • Calculate the open value
Open value = open price * contract multiplier * open quantity
= 40,500 * 100 * 10
= 40,500,000 USDT
  • Calculate the liquidation price
Liquidation price = (40,500,000 - 4,050,000 + 40.5 - 0) / ((1 - 0.5%) * 100 * 10)
= 36633.21 USDT
 
Therefore, in this example, if the account equity falls below the maintenance margin requirement, the position will be forcibly liquidated at 36,633.21 USDT.
  1. The formula for calculating the liquidation price in short position mode:
Liquidation price = (open value - initial margin + fee - additional margin) / ((1 - maintenance margin rate) * contract multiplier * number of contracts)
 
Initial margin = contract multiplier * open quantity * open price / leverage (USDT)
 
Open value = open price * contract multiplier * open quantity (USDT)
 
Maintenance margin rate = Maintenance margin rate of the corresponding position
  • Calculation example:
Suppose Astral Exchange offers a BTC/USDT contract with a contract multiplier of 100, leverage of 10x, an open quantity of 2 (i.e. 2BTC), an open price of 50,000 USDT, a maintenance margin rate of 0.5% for the corresponding position, and assuming that the fee charged by the exchange at this time is 0.01%.
  • Calculate the initial margin
Initial margin = contract multiplier * open quantity * open price / leverage
= 100 * 2 * 50,000 / 10
= 1,000,000 USDT
  • Calculate the open value
Open value = open price * contract multiplier * open quantity
= 50,000 * 100 * 2
= 10,000,000 USDT
  • Calculate the liquidation price
Liquidation price = (10,000,000 + 1,000,000 - 1000 + 0) / ((1 + 0.5%) * 100 * 2)
= 54,472.14 USDT
 
So, in this example, if the market price falls to 54,472.14 USDT, the Astral Exchange will force liquidate the position.
 
Several variables are included in the above formula:
  • Liquidation price: If the account equity falls below the maintenance margin requirement, liquidation will be triggered, and the price at this time is the liquidation price.                                                                                                                                                                
  • Open value: The total value of the open position, i.e. the value of the current position.                                                                                                                                                                
  • Initial margin: The margin to be paid when opening a position.                                                                                                                                                                
  • Fee: The fee to be paid when opening and closing a position.                                                                                                                                                                
  • Additional margin: If the available balance in the account is not sufficient to meet the maintenance margin requirement, additional margin is required.                                                                                                                                                                
  • Maintenance margin rate: The maintenance margin rate for a contract. When the account equity is lower than the maintenance margin requirement, additional margin or liquidation operation is required.                                                                                                                                                                
  • Contract multiplier: The value of a contract, i.e. how many base currencies (e.g. BTC) each contract represents. The contract multiplier is usually a fixed value that varies depending on the type of contract.                                                                                                                                                                
  • Number of contracts: The number of contracts a trader buys or sells, and is the basic unit in trading.
It should be noted that the above calculation method is based on different futures models and the exact calculation method may vary from platform to platform. In addition, the liquidation line is dynamic and will be constantly adjusted with market price fluctuations, so you need to pay attention to liquidation information to make a reasonable trading decision.
 
Disclaimer: Astral reserves the right to change the above-mentioned adjustments to the calculation of futures liquidation at any time.

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