What Is the Term for a Margin Call That Cannot Be Met?
A margin call that cannot be met, or a "failed margin call," results in the immediate, forced liquidation of the trader's position. In traditional finance, this can lead to the broker selling assets to cover the deficit.
In crypto futures, the automated liquidation engine takes over, closing the position at the best available price to prevent the account balance from becoming negative.
Glossar
Account Balance
Valuation ⎊ Account balance, within cryptocurrency, options, and derivatives, represents the net liquid value accessible to a participant, factoring in realized and unrealized profit and loss across open positions and collateral held.
Best Available Price
Execution ⎊ Best Available Price, within cryptocurrency derivatives, represents the lowest ask price accessible to a trader given prevailing market conditions and order book depth.
Automated Liquidation Engine
Mechanism ⎊ Automated Liquidation Engines represent a critical component within cryptocurrency derivatives exchanges, functioning as pre-programmed protocols designed to mitigate counterparty risk during periods of significant adverse price movement.
Forced Liquidation
Liquidation ⎊ Within cryptocurrency derivatives, options trading, and financial derivatives, liquidation represents the involuntary closure of a leveraged position due to margin deficiencies.
Broker Selling Assets
Asset ⎊ The core activity of a broker selling assets within cryptocurrency, options, and derivatives contexts involves facilitating the transfer of ownership or rights to underlying assets.
Failed Margin Call
Default ⎊ A failed margin call occurs when a trader's account equity falls below the maintenance margin requirement and they are unable to deposit additional collateral to restore the required level.