Liquidation

Liquidation Condition

Once this condition is triggered, the position is ready to be liquidated.

For liquidation formulas, max_lev refers to liquidation leverage, not the opening leverage cap.

Term	Value
Liquidation leverage	500x
Maintenance / liquidation margin	20 bps
Liquidation close fee	0.0012 * Size

$$\text{Liquidation} \iff \begin{cases} \text{collateral\_size}+\text{PNL}_{\text{long}}-\text{close\_fee}\;\le\;\dfrac{\text{size}}{\text{max\_lev}}, & \text{Expiry Long},\\ \text{collateral\_size}+\text{PNL}_{\text{short}}-\text{close\_fee}\;\le\;\dfrac{\text{size}}{\text{max\_lev}}, & \text{Expiry Short}. \end{cases}$$

Where:

$$\mathrm{PNL}= \begin{cases} \dfrac{\text{size}}{F(S_0,r,T_0)}\Bigl(F(S_1,r,T_1)-F(S_0,r,T_0)\Bigr), & \text{Expiry Long},\\ \dfrac{\text{size}}{F(S_0,r,T_0)}\Bigl(F(S_0,r,T_0)-F(S_1,r,T_1)\Bigr), & \text{Expiry Short}. \end{cases}$$

• S_1 is the current oracle price
• S_0 is the oracle price at entry
• T_1 is the current time
• T_0 is the time at entry

Liquidation Price

The expiry future liquidation threshold is expressed in theoretical future-price terms. Liquidation is triggered when the current theoretical future price reaches this threshold.

$$F_{\text{liq}}= \begin{cases} F_0-\dfrac{\left(\text{collateral\_size}-\text{close\_fee}-\dfrac{\text{size}}{\text{max\_lev}}\right)\;F_0}{\text{size}}, & \text{Expiry Long},\\ F_0+\dfrac{\left(\text{collateral\_size}-\text{close\_fee}-\dfrac{\text{size}}{\text{max\_lev}}\right)\;F_0}{\text{size}}, & \text{Expiry Short}. \end{cases}$$

Where:

• F_liq is the theoretical future-price liquidation threshold.
• F_0 = F(S_0, r, T_0) = S_0 * exp(r * T_0) is the entry future price.
• Liquidation is triggered by comparing F(S_1, r, T_1) against F_liq.
• close_fee = 0.0012 * Size for liquidation.

$$r= \begin{cases} r_{\text{TOKEN-fixed}}, & \text{Expiry Long},\\ -r_{\text{USDC-fixed}}, & \text{Expiry Short}. \end{cases}$$