Liquidations
Liquidation risks and managing them effectively on HyperETH
Liquidation is the automatic closure of a position when your margin can no longer support it.
What triggers a liquidation?
A liquidation is triggered when your account equity (remaining margin) falls below the maintenance margin requirement for your open position.
Key concepts:
- Initial Margin: The collateral you provide when opening a position.
- Maintenance Margin: The minimum required collateral to keep the position open.
- Liquidation Price: The price at which your position will be force-closed to prevent further loss.
At maximum leverage, maintenance margin is typically set at 50% of your initial margin. This means:
- At 40x leverage, the maintenance margin is roughly 1.25% of your position size.
- At 3x leverage, it’s around 16.7%.
If the market moves against your position and your equity drops below the maintenance margin, your position will be liquidated. This will result in the loss of your entire margin for a position.
What happens during a liquidation?
When a liquidation is triggered, HyperETH attempts to close your position at the best available price through a market order.
If this is successful:
- Your position is closed
- Any remaining margin is returned to your account
If market conditions are adverse (e.g. high volatility or low liquidity):
- You may lose your entire position margin
- However, HyperETH's system ensures your account will not go negative.
Backstop liquidations
If the market fails to fully close your position and your equity falls below two-thirds of the maintenance margin, HyperETH triggers a backstop liquidation using the Liquidator Vault.
This affects you depending on the margin mode:
- Cross Margin: All funds and positions in your Perps account are transferred to the Liquidator Vault.
If you have no isolated positions, your account equity becomes zero.
- Isolated Margin: Only the specific isolated position and its assigned margin are liquidated.
Other positions and funds remain unaffected.
In backstop cases, the maintenance margin is not refunded. It acts as a buffer to ensure liquidations remain economically viable for the Liquidator Vault.
Tips on avoiding liquidations
- Use lower leverage to reduce the liquidation risk margin
- Monitor the margin ratio and keep extra collateral in your account to stay above the maintenance margin
- Set stop loss (SL) orders to automatically exit positions before liquidation triggers.
- Understand margin modes effectively, using Isolated for single-position risk, or **Cross **for portfolio-level exposure
Viewing liquidations on HyperETH
Under the Positions tab, the Liquidation Price for each position will be displayed.
