Margin calculations

IM, MM and liquidation formula

Margin definitions

• Initial Margin (IM): collateral required to open a position.

• Maintenance Margin (MM): minimum collateral to keep a position open; falling below triggers liquidation.

Let IMR = 1 / MaxLeverage and MMR be the maintenance margin ratio (displayed in the UI; subject to change per market).

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Approximate liquidation prices (isolated-formula intuition)

Ignoring fees/funding for intuition, for a position opened at price Pe:

Long liquidation (approx.):

$$P_{\text{liq,long}} \approx \frac{P_e - \frac{M}{q}}{1 - m}$$

Short liquidation (approx.):

$$P_{\text{liq,short}} \approx \frac{P_e + \frac{M}{q}}{1 + m}$$

Where 𝑞 > 0 is quantity, 𝑀 is isolated margin, and m = 10% is the maintenance ratio

These are simplified for intuition. Actual liquidation considers live mark, fees, funding accrual, and execution slippage.