🛟Liquidation
When is liquidation triggered?
A position will be liquidated under either of the following conditions:
The market price reaches the liquidation price.
The collateral becomes insufficient to cover outstanding fees.
How is the Liquidation Price calculated?
Long Position
Liquidation Price = Entry Price - (Collateral × Liquidation Loss Rate - Fees) ÷ Position Size (in Quantity)
Short Position
Liquidation Price = Entry Price + (Collateral × Liquidation Loss Rate - Fees) ÷ Position Size (in Quantity)
Fees include: Close Fee, Holding Fee, and Funding Fee.
Liquidation Loss Rate = 85%
Position Size (in Quantity) = Initial Collateral × Leverage ÷ Entry Price
A position will be liquidated once it has lost 85% or more of its value.
Minimum Position Leverage
Positions with leverage below 1x will be automatically closed.
This is a minimum leverage requirement and is separate from standard liquidation. Users should monitor their position leverage to avoid unexpected auto-closure.
Collateral Value in Liquidation
When a user opens a position, the collateral they provide becomes the position margin after trading fees are deducted. This margin is held in the position’s margin asset, such as LVUSD, LVMON, USDC, MON, or another supported collateral token.
The USD value of the margin is calculated as:
For example, if a position has 100 USDC as margin and USDC is priced at $1, the margin value is $100.
During liquidation, LeverUp also considers the position’s unrealized profit or loss, funding fees, holding fees, and closing fees. These values are converted into the same asset as the position margin, so they can be compared consistently.
A simplified liquidation condition is:
Where:
If the position has a loss, PnL is negative, so it increases the total loss. If the position has a profit, PnL is positive, so it reduces the total loss.
The liquidation threshold depends on the market configuration. For example, if a market has an 85% liquidation threshold, the position can be liquidated once the total loss and fees reach 85% of the margin.
Example: MON as Margin
Assume MON is priced at $0.025, and a user opens the minimum $200 position at 10x leverage.
If the market liquidation threshold is 85%, the position becomes liquidatable when loss and fees consume:
So if the position’s loss and fees are converted into MON and reach at least 680 MON, the Keeper can liquidate the position.
In USD terms:
So this $200 position with 800 MON margin can be liquidated once losses and fees consume roughly $17 worth of MON margin.
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