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SOL falls. When is your 10x long closed?100 USDT of margin on 5 SOL from 200. Dashed: maintenance margin.100200mark price100 left−5050190mark price50 left−95≈181mark priceLiquidated
SOL falls.When is your 10x long closed?100 USDT of margin on 5 SOL from 200.Dashed: maintenance margin.100−5050−95200mark price100 left190mark price50 left≈181mark priceLiquidated

Liquidation starts when your equity reaches maintenance margin.

Liquidation

Liquidation closes your position when your margin left falls to the maintenance margin, measured at the mark price.

Lesson 6 of 87 min3 parts

Updated . Cryptathon rules checked on .

Liquidation is when the exchange closes your futures position because your margin left (margin plus PnL) has fallen to the maintenance margin. On Cryptathon that is 0.5% of the position, measured at the mark price. A 10x long is liquidated about 9.5% below entry, a 10x short about 9.5% above.

By the end, you can

  1. 1Say when a position is liquidated
  2. 2Work out the liquidation price of a long and a short
  3. 3Work out the penalty and what you get back

1 of 3

When is a position liquidated?

Your position is liquidated when your margin left falls to the maintenance margin, 0.5% of the position. That starts the liquidation close; a fast move can use up the rest of the margin before it completes.

Your margin left is the margin you put in plus your PnL. On Cryptathon the exchange measures it at the mark price, not at the last trade.

Worked example

How close is the trigger?

You put 100 USDT of margin on a SOL long at 10x, with SOL at 200 USDT. The mark price falls to 190. Are you liquidated?

  1. 1
    Find the position sizeMargin times leverage.
    100 × 10 = 1,000 USDT
  2. 2
    Find how much SOL you holdThe position size at your entry price.
    1,000 ÷ 200 = 5 SOL
  3. 3
    Find your lossEach SOL is 10 USDT below your entry.
    5 × 10 = 50 USDT
  4. 4
    Find your margin leftMargin plus PnL.
    100 − 50 = 50 USDT
  5. 5
    Find the maintenance margin0.5% of the position at the mark price.
    5 × 190 × 0.5% = 4.75 USDT

AnswerNo. You have 50 USDT of margin left, and the trigger is at 4.75 USDT. The position stays open.

Margin left, USDT0255075100200195190185180Mark price, USDT (falling)maintenance: 5 USDT at 200, ≈ 4.52 near 181Entry 200: 100 USDT190: 50 USDT leftLiquidated near 181
Margin left, USDT050100200190180Mark price, USDT (falling)maintenance:5 USDT at 200,≈ 4.52 near 181Entry 200: 100 USDT190: 50 USDT leftLiquidated near 181
Figure 1 The 10x SOL long from the example. Margin left falls 5 USDT for each 1 USDT the mark price falls. Near 181 it meets the maintenance margin and the position is closed.
Your turn Your 10x long has 6 USDT of margin left. The maintenance margin is about 4.53 USDT. One big trade prints a last price far below your entry, but the mark price does not move. What happens?
  1. The position is liquidated

    The trigger uses the mark price. The mark did not move, so your margin left is still 6 USDT.

  2. Nothing yet

    Right. The exchange measures your margin left at the mark price, and the mark did not move.

  3. You lose the 6 USDT at once

    Your margin left only changes with the mark price, and you are not closed while it is above about 4.53 USDT.

  4. The exchange asks you for more margin

    Liquidation does not ask first. The position is closed when the margin left reaches the maintenance margin.

Show the answer

B: Nothing yet. The exchange measures your margin left at the mark price, and the mark did not move.

2 of 3

How do you work out the liquidation price?

The liquidation price is the mark price at which the trigger fires. You can find it from the same rule of thumb as in Leverage: the room to move is about 1 ÷ leverage − 0.5%.

For a long, take the room off the entry price. For a short, add it on. The answer is approximate: the exact formula below gives a price a little different, here by about 0.10 USDT.

Worked example

A 10x and a 20x long

You open two SOL longs at 200 USDT, one at 10x and one at 20x. About where is each one liquidated?

  1. 1
    Find the room at 10xAbout 9.5%.
    1 ÷ 10 − 0.5% = 0.095
  2. 2
    Turn it into USDT9.5% of the entry price.
    200 × 0.095 = 19 USDT
  3. 3
    Take it off the entryA long loses when the price falls.
    200 − 19 = 181 USDT
  4. 4
    Find the room at 20xAbout 4.5%.
    1 ÷ 20 − 0.5% = 0.045
  5. 5
    Turn it into USDT and take it off4.5% of 200 is 9.
    200 − 200 × 0.045 = 191 USDT

AnswerThe 10x long is liquidated near 181 USDT, the 20x long near 191 USDT. Double the leverage and the liquidation price comes about twice as close.

Worked example

A 10x short

You open a SOL short at 200 USDT at 10x. About where is it liquidated?

  1. 1
    Find the roomThe same room as the 10x long.
    1 ÷ 10 − 0.5% = 0.095
  2. 2
    Turn it into USDT9.5% of the entry price.
    200 × 0.095 = 19 USDT
  3. 3
    Add it to the entryA short loses when the price rises.
    200 + 19 = 219 USDT

AnswerNear 219 USDT, above your entry.

SOL price, USDT180190200210220Entry10x long10x long ≈ 181 (−19)20x long20x long ≈ 191 (−9)10x short10x short ≈ 219 (+19)
SOL price, USDT180190200210220Entry10xlong10x long ≈ 181 (−19)20xlong20x long ≈ 191 (−9)10xshort10x short ≈ 219 (+19)
Figure 2 Three positions opened at 200 USDT. The 10x long is liquidated near 181, the 20x long near 191, and the 10x short near 219.

The rule of thumb keeps back the maintenance margin at your entry price. The exact formula keeps it back at the liquidation price itself. On Cryptathon a long is liquidated at (entry price − margin ÷ coin quantity) ÷ (1 − 0.5%), but never below 0. A short is liquidated at (entry price + margin ÷ coin quantity) ÷ (1 + 0.5%). The margin is the position's margin now; it starts at coin quantity × entry price ÷ leverage, with no fees in it.

Worked example

The exact price of the 10x long

Your 10x SOL long: 5 SOL, entry 200 USDT, 100 USDT of margin. Where exactly is it liquidated?

  1. 1
    Find the margin for each SOLMargin divided by coin quantity.
    100 ÷ 5 = 20 USDT
  2. 2
    Take it off the entryAt this price the margin left would be 0.
    200 − 20 = 180 USDT
  3. 3
    Divide by 1 − 0.5%This keeps back the maintenance margin at the liquidation price.
    180 ÷ 0.995 ≈ 180.90 USDT

Answer180.90 USDT. The rule of thumb said 181, so the exact price is 0.10 USDT lower.

Worked example

The exact price of the 10x short

Your 10x SOL short: 5 SOL, entry 200 USDT, 100 USDT of margin. Where exactly is it liquidated?

  1. 1
    Find the margin for each SOLMargin divided by coin quantity.
    100 ÷ 5 = 20 USDT
  2. 2
    Add it to the entryAt this price the margin left would be 0.
    200 + 20 = 220 USDT
  3. 3
    Divide by 1 + 0.5%This keeps back the maintenance margin at the liquidation price.
    220 ÷ 1.005 ≈ 218.91 USDT

Answer218.91 USDT. The rule of thumb said 219, so the exact price is 0.09 USDT lower, a little closer to your entry.

Funding also moves the liquidation price. On Cryptathon funding is paid out of, or into, the position's margin (if a payment is bigger than the margin, the rest comes from your free balance). So funding you pay brings the liquidation price closer, and funding you receive moves it away. On Cryptathon the app shows the liquidation price of each open position. To try your own numbers, use the liquidation price calculator.

Your turn You open a SOL short at 200 USDT at 20x. About where is it liquidated?
  1. 191 USDT

    That is where a 20x long is liquidated. A short loses when the price rises, so add the room.

  2. 209 USDT

    Right. The room is 1 ÷ 20 − 0.5% = 4.5%, and 200 + 9 = 209.

  3. 210 USDT

    You used 5% as the room. Keep back the 0.5% maintenance margin: the room is 4.5%.

  4. 219 USDT

    That is the 10x short. At 20x the room is half as big.

Show the answer

B: 209 USDT. The room is 1 ÷ 20 − 0.5% = 4.5%, and 200 + 9 = 209.

3 of 3

What do you get back after liquidation?

When the trigger fires, the exchange closes the position with a reduce-only order; if it does not fill, the insurance fund takes it over. There is no trading fee on the liquidation close. The insurance fund is a pool of money that takes over positions the market cannot close in time.

There is a liquidation penalty of 0.5% of the closed size. It never takes more than the margin left, so you cannot lose more than the margin you put in. What is left after the penalty comes back to you.

Worked example

Liquidated at 181

Your 10x SOL long from part 1 (5 SOL, entry 200, 100 USDT margin) is liquidated, and the close fills at 181 USDT. What do you get back?

  1. 1
    Find the closed sizeThe position's value at the close.
    5 × 181 = 905 USDT
  2. 2
    Find your margin leftYou lost 19 USDT on each of 5 SOL.
    100 − 5 × 19 = 5 USDT
  3. 3
    Find the penalty0.5% of the closed size.
    905 × 0.5% = 4.525 USDT
  4. 4
    Take it off your margin leftThe penalty is less than the margin left, so all of it is charged.
    5 − 4.525 = 0.475 USDT

AnswerAbout 0.48 USDT. Of your 100 USDT you lost 95 to the price move and 4.525 to the penalty.

Worked example

The cap

The price falls fast, and the same position is closed at 180.50 USDT. What do you get back?

  1. 1
    Find the closed sizeThe position's value at the close.
    5 × 180.5 = 902.5 USDT
  2. 2
    Find your margin leftYou lost 19.50 USDT on each SOL.
    100 − 5 × 19.5 = 2.5 USDT
  3. 3
    Find the penalty before the capThis is more than your margin left.
    902.5 × 0.5% = 4.5125 USDT
  4. 4
    Apply the capThe penalty takes only the 2.50 USDT that is left.
    2.5 − 2.5 = 0 USDT

AnswerNothing, but you lose no more than your 100 USDT of margin.

Your 100 USDT of marginClosed at18195 lost to the price move0.475 back4.525 penaltyClosed at180.5097.50 lost to the price move0 back2.50 penalty (capped)
Your 100 USDT of marginClosed at18195 lost to the price move4.525 penalty0.475 backClosed at180.5097.50 lost to the price move2.50 penalty (capped)0 back
Figure 3 Where your 100 USDT goes. Closed at 181: 95 to the price move, 4.525 to the penalty, 0.475 back. Closed at 180.50: 97.50 to the price move and the last 2.50 to the penalty.
Your turn Your position is liquidated with 8 USDT of margin left. The closed size is 1,000 USDT. What do you get back?
  1. 3 USDT

    Right. The penalty is 1,000 × 0.5% = 5 USDT, and 8 − 5 = 3 USDT.

  2. 8 USDT

    You forgot the penalty of 0.5% of the closed size.

  3. 7.96 USDT

    That takes 0.5% of the 8 USDT margin left. The penalty is 0.5% of the closed size, 1,000 USDT.

  4. 2.50 USDT

    That also takes a 0.05% taker fee. There is no trading fee on the liquidation close.

Show the answer

A: 3 USDT. The penalty is 1,000 × 0.5% = 5 USDT, and 8 − 5 = 3 USDT.

Common questions

Can you lose more than your margin?

Not on an isolated position. The liquidation penalty is 0.5% of the closed size, but it never takes more than the margin left. If the price moves so fast that the close cannot fill, the insurance fund takes the position over. So with 100 USDT of margin, the most that position can lose is 100 USDT. The opening fee is paid on top of the margin.

How can you keep a position from being liquidated?

Close it yourself before the mark price reaches the liquidation price, or set a stop-loss between your entry and that price. On Cryptathon each exit is a reduce-only stop-market order that fires when the mark price reaches your level, so it can close a long before the mark falls to its liquidation price. Lower leverage also gives more room: a long has about 9.5% of room at 10x, but only 1.5% at 50x.

Where does the liquidation penalty go?

On Cryptathon the liquidation penalty goes to the insurance fund, not to the traders on the other side. The insurance fund is a pool of money that takes over positions the market cannot close in time. The penalty is 0.5% of the closed size, so a 1,000 USDT position closed by liquidation pays up to 5 USDT, capped at the margin left.

Check yourself

Three questions on the whole lesson.

Question 1 of 3 You open an ETH long at 300 USDT at 10x. About where is it liquidated?
  1. 271.50 USDT

    Right. The room is about 9.5%, and 300 − 28.50 = 271.50.

  2. 270 USDT

    You used 10% as the room. Keep back the 0.5% maintenance margin.

  3. 328.50 USDT

    That is where a 10x short is liquidated. A long is liquidated below the entry.

  4. 298.50 USDT

    That uses only the 0.5% maintenance margin. The room is 1 ÷ 10 − 0.5%.

Show the answer

A: 271.50 USDT. The room is about 9.5%, and 300 − 28.50 = 271.50.

Question 2 of 3 You hold a short. A last trade prints above your liquidation price, but the mark price stays below it. What happens?
  1. The position is liquidated

    The trigger uses the mark price, not the last trade.

  2. The position stays open

    Right. Liquidation is measured at the mark price, and the mark has not reached your liquidation price.

  3. Half the position is closed

    The trigger has not fired, so nothing is closed.

  4. The exchange charges the penalty only

    There is no penalty unless the position is liquidated.

Show the answer

B: The position stays open. Liquidation is measured at the mark price, and the mark has not reached your liquidation price.

Question 3 of 3 You are liquidated with 3 USDT of margin left. The penalty works out at 4 USDT. What do you pay?
  1. 3 USDT, and you get nothing back

    Right. The penalty is capped at the margin left.

  2. 4 USDT, taking 1 USDT from your free balance

    The penalty never takes more than the margin left.

  3. 7 USDT

    You added the margin left and the penalty. The penalty is capped at the margin left.

  4. 4 USDT plus a trading fee

    There is no trading fee on the liquidation close, and the penalty is capped at 3 USDT.

Show the answer

A: 3 USDT, and you get nothing back. The penalty is capped at the margin left.

What to remember

  1. When is a position liquidated?You are liquidated when margin left falls to the maintenance margin, measured at the mark price.
  2. How do you work out the liquidation price?For a quick guess, take the room off the entry for a long or add it for a short. For the exact price, use your margin, quantity and the formula.
  3. What do you get back after liquidation?The penalty is 0.5% of the closed size, capped at the margin left; the rest comes back to you.

Short version: read the blog post.

Next lessonMark price and last price