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A position is liquidated when an oracle game settles at a price that puts the trader’s equity below the maintenance margin. Equity is the trader’s margin plus PnL, after funding. When this happens, the matcher receives all the collateral in the position, including the trader’s remaining margin, and the position ends. Any unclaimed close reward is returned to the trader. Liquidation takes priority over a pending close request and can happen before maturity.

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Maintenance margin

The maintenance margin is the smaller of half the trader’s margin or 0.35% of notional. At higher leverage a position is liquidated once it has lost half its margin. At lower leverage maintenance margin is 0.35% of notional, so nearly the whole margin can be lost to PnL before liquidation. The ticket shows the estimated liquidation price as Liq. price.

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How it happens

There is no price feed watching positions. A liquidation needs someone, usually the matcher, to start an openOracle game on the position. If that game settles with the position still healthy, it stays open, unless the trader has asked to close or maturity has passed, in which case it closes at the settled price. Liquidation also needs advance notice. Someone must post a public on-chain notice for the position, either while its oracle game is running or up to 3 minutes before the game starts, and the game must become eligible to settle at least 15 seconds after the notice. Without a valid notice, a game that shows the position below maintenance does not liquidate it, and the position stays open.