Liquidations
Last updated
Last updated
Surge allows traders to utilise leverage to amplify the size of their positions, as detailed in the Traders and Collateral sections. Collateral provided is used as security to open a leveraged position. In the event that the market moves unfavourably against a traders position, the value of the collateral may be at risk of providing inadequate security to cover any losses, at which point this collateral may be liquidated automatically by Surge.
Surge requires a minimum amount of equity to be held by a user in order to open and maintain a leveraged position and avoid liquidation. In the example below, assume a long position is opened with 20x leverage. The total position size is $256.89 as shown:
Hovering over the coloured bar displays the 'Risk Meter' which represents the initial margin utilisation. For this position and considering 20x leverage, a minimum of $256.89 / 20 must be available as equity to open the position, which in this case equates to $12.84. As can be seen in the image above, we have $13.20 available so the Risk Meter displays a value of less than 100% indicating that we currently have assets greater than the initial margin requirement.
If the market moves against this position, the balance shown (taking into account the current profit/loss) will reduce, and in the event this drops below the initial margin requirement, will be reflected in the Risk Meter showing a value in excess of 100%.
If this happens, the position is at considerable risk, but not yet liquidated.
In addition to the initial margin described above, Surge requires a minimum amount of margin to prevent liquidation, referred to as Maintenance Margin. This is currently set by Surge to be 1%.
In the example above, assuming a position size of $256.89, a minimum equity of $2.57 must be available to keep the position open. In the event that the account drops below this value, Keepers will automatically liquidate the collateral to prevent the account from running at a loss.
Adjacent to the "Risk Meter" shown in the image above is a coloured bar which starts at green and rises through to red as the account approaches the Maintenance Margin limit and liquidation.
It is important to remember that Surge utilises which aggregates margin across positions, allowing losses in some positions to be offset by profit in others when calculating margin requirements. Surge also may apply a discounted value to collateral when calculating margin requirements, as described in the section.
