Bankruptcy Price
Bankruptcy price is the theoretical price at which a leveraged position's allocated equity would be exhausted under a venue's accounting rules.
✦ Key Insight
It helps explain why liquidation mechanisms act before a position reaches complete collateral depletion.
✕ Common Misconceptions
Formulas differ by exchange and contract, so do not copy a bankruptcy level from another platform.
Detailed Explanation
In Practice
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Margin
Margin is capital deposited or maintained to support a leveraged trading position.
Mark Price
Mark price is a fair-value reference used by many derivatives venues to calculate unrealized profit and loss and liquidation risk.
Liquidation
Liquidation is the forced reduction or closure of a leveraged or collateralized position when required risk or collateral thresholds are breached.
Leverage
Leverage allows a trader to control a position larger than the capital committed to support it.
Maintenance Margin
Maintenance margin is the minimum collateral or account equity a leveraged position must maintain to remain open under a venue's rules.