What Is the Immediate Consequence for a Trader Whose Position Is ADL-closed?
The immediate consequence is that their profitable position is closed by the exchange at the bankrupt counterparty's bankruptcy price. The trader loses the expected profit between the bankruptcy price and the current market price.
The trader receives the collateral from the closed position, but the unexpected closure and loss of potential profit are the primary consequences, often leading to frustration and the need to re-establish their trade.
Glossar
Loss of Potential Profit
Opportunity ⎊ The Loss of Potential Profit represents the opportunity cost incurred when a position is closed prematurely, either voluntarily or via liquidation, relative to its theoretical maximum value had the market moved favorably.
Adl Closure
Closure ⎊ The Adl Closure, within the context of cryptocurrency derivatives and options trading, represents a specific mechanism for settling or finalizing contracts when the underlying asset's price exhibits extreme volatility or illiquidity, particularly prevalent in nascent crypto markets.