Which Positions Are Selected First for Auto-Deleveraging?
The ADL system typically selects the most highly leveraged and most profitable positions first for deleveraging. Exchanges use a ranking system to prioritize these positions, as they pose the greatest risk to the exchange's solvency and have the largest unrealized gains that can be used to cover the deficit.
The selection is usually instant and automated.
Glossar
ADL System
Framework ⎊ The ADL System, within cryptocurrency derivatives and options trading, represents a structured approach to algorithmic delta hedging, specifically tailored for assets exhibiting non-standard price behavior or limited liquidity.
Most Profitable Positions
Volatility ⎊ The exploitation of implied volatility differentials, particularly through short volatility strategies like selling straddles or strangles on cryptocurrencies, can yield substantial returns given the asset class’s inherent price swings.