3.7 Estimated Liquidation Price Calculation

CoinFLEX uses portfolio VaR to calculate risk. This means that instead of a concept of position margin, CoinFLEX looks at the portfolio margin of your account. This means the actual margin required is a function of all the positions and orders in your portfolio, compared to the collateral balance you have.

However, we understand that getting an estimated liquidation price is important for traders. Hence we have come up with an Estimated Liquidation Price calculation as a handy reference to help traders to know at what price their positions are at risk of liquidation:

Three important things to note about estimated liquidation price:

  • It is just an estimate. This is a first order approximation to the liquidation price for that particular contract position, assuming nothing else changes in the world, which may affect your margin and collateral balances

  • Becomes more accurate as the mark price gets closer the the liquidation price

  • Often prices fall in unison. This could mean your positions could get liquidated at much better price levels as other positions have also worsened.

Calculation of Estimated Liquidation Price – LINEAR account

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  • marketPrice is the current mark price

  • collateralBalance is the haircutted collateral balance of the account

  • portfolioVarMargin is calculated from the risk engine. liqMarginRatio = 50% = 0.5

  • position is the contract position. negative for short positions

This can be calculated for each position. Only marketPrice and position are specific to the contract.