What Is the Difference between Liquidation Price and Bankruptcy Price in Futures Trading?
The liquidation price is the market price at which an exchange's risk engine automatically closes a trader's position to prevent further losses. This is the point where the margin is just enough to cover the maintenance margin requirement.
The bankruptcy price is the theoretical price at which a trader's position loss equals their entire initial margin, resulting in a zero account balance. The exchange aims to liquidate before the bankruptcy price is reached, using the remaining equity to cover fees and contribute to the insurance fund.
