How to calculate the liquidation price of a contract

The contract liquidation price is the market price when the contract is liquidated. The calculation steps are as follows: Determine the contract purchase price. Calculate contract margin. Calculate contract value. Substitute the formula: contract liquidation price = contract purchase price + (contract margin / contract value) x contract multiplier.

Calculation of contract liquidation price

In futures or options trading, the contract liquidation price refers to the market price at which the position order is liquidated (forced liquidation). Liquidation occurs when there are insufficient funds in the account to maintain a losing position.

Calculation formula:

Contract liquidation price = contract purchase price + (contract margin/contract value) The price when the contract was originally opened.

Calculate the contract margin: Relative to the market value of the contract, the margin required when opening a contract.

1. Calculate the contract value: The value of the contract underlying multiplied by the contract multiplier.
2. Substitute the formula: Substitute the above values ​​into the above formula to get the liquidation price of the contract.
3. Example:
4. Suppose you purchase a futures contract worth 100 yuan, the contract margin is 10%, and the contract multiplier is 10.
Contract purchase price: 80 yuan

Contract margin: 10 yuan Contract value: 100 yuan x 10 = 1,000 yuan

Contract liquidation price: 80 yuan + (10 yuan / 1,000 yuan) x 10 = 81 Yuan

• This means that when the market price drops to 81 yuan, the contract will be closed to avoid further losses.
• Note:
• The liquidation price changes dynamically and is adjusted in real time as the market price fluctuates.

The liquidation price can be higher or lower than the current market price.

The liquidation price is only applicable to margin transactions, and full payment transactions are not subject to this restriction. Traders should avoid holding excessively large positions and reasonably control risks to reduce the risk of liquidation.

The above is the detailed content of How to calculate the liquidation price of a contract. For more information, please follow other related articles on the PHP Chinese website!