What Is a ‘Bankruptcy Price’ in the Context of Futures Liquidation?
The bankruptcy price is the price level at which a trader's equity in a leveraged position becomes zero. If a position is liquidated at or beyond this price, the trader's entire initial margin is lost, and the account is considered bankrupt.
The exchange attempts to close the position before this price is reached to recover the initial margin and prevent the loss from falling to the insurance fund. It serves as the ultimate loss threshold for the trader.
