Leverage funding and liquidation

EN source master · P06-L06 · 30 minutes estimated · needs_review

Offline formative study. No wallet connection, real funds, private keys, signatures, live trade or personal portfolio inputs. Visuals are specifications. This source master remains needs_review; completing the formative exercise does not issue certification.

Leverage ratios summarize notional versus equity but do not specify the rule that makes a position liquidatable.

Read the rule before solving

Initial and maintenance margin have different purposes, and requirements may change [MARGIN]. This lesson uses a separate fictional venue, not CME's process. The toy long has10 linear units at entry100, collateral 200, no other positions and no cross-margin. At markP, equity=200+10(P−100)−funding 10−fees 5. Maintenance=10% of mark notional 10P. The toy rule marks equity≤maintenance as eligible for liquidation.

Solve the stipulated equality

Equity=10P−815; maintenance=P. Equality gives 9P=815, soP≈90.5556. This is a model boundary, not a live platform quote or guaranteed exit. Fees and funding are deducted once as stipulated; double-counting changes the result.

Funding and price can differ

The funding charge is an assigned amount, not a quoted rate or promise. A real perpetual venue can use index/mark prices, changing funding, tiers, collateral haircuts and close-out fees. Their exact specifications would be required before reconstructing its threshold. A spot chart price alone may not be the liquidation reference.

Stress the boundary

At a mark below the threshold the toy becomes eligible; the actual fill could be worse or unavailable. An8% maintenance variant changes the equality. This demonstrates parameter dependence, not preferred leverage. Leverage is 1000/200=5 in the initial fixture before deductions; no learner is told to use that ratio. Loss can exceed posted collateral in products where venue rules allow it.

• Notional: quantity times stated mark price.
• Equity: collateral plus modeled P&L less assigned charges.
• Maintenance: rule-defined required equity.
• Eligibility threshold: condition allowing liquidation, not a fill guarantee.

ILLUSTRATIVE fictional venue SIM-M: q10,entry100,collateral 200,funding 10,fees 5,maintenance rate10%, equality eligible. Alternate maintenance 8%. T markers describe fictional order; catalog historical-signal-timeline visual is explicitly illustrative, with no historical signal.

ILLUSTRATIVE timeline/table separating entry, assigned charges and mark-price tests; solve threshold at 90.5556 and alternate88.58696. No real venue UI, historical event, signal or executable liquidation line.

Eligibility under precisely stipulated fictional rules.

Actual venue thresholds, executable fills, collateral protection or suitable leverage.

• OBSERVED: FIX-P06-L06 stipulates funding 10 and fees 5.
• INFERRED: equality threshold 815/9 under 10% maintenance.
• UNKNOWN: any real venue's current reference prices and tiers.
• INSUFFICIENT EVIDENCE: liquidation protects the desk from further loss.

• Treating initial margin as maintenance.
• Using last trade instead of specified mark.
• Equating threshold with realized exit.

Derive threshold, compute equity and maintenance atP90, then solve the8% variant. Identify which assumptions would need verification for a named venue.

Deliver calculations or annotations, claim/source table and limitations. Suggested allocation: study 12 minutes, exercise 8, correction/quiz 10; estimate subject to calibration.

• Write complete equity and maintenance equations.
• Separate funding and fees.
• Name mark reference and inequality.
• Keep eligibility distinct from execution.

A liquidation threshold belongs to specified venue rules. Funding, collateral, maintenance and execution assumptions must remain separate.

• Reconstruct a fictional maintenance threshold.
• Separate funding, collateral and liquidation price assumptions.

P06-L07 after correction review.

NONE in the authoritative catalog. The supplied offline fixture/package is sufficient; no paid feature or unverified Production capability is required. Lab/certification metadata denotes downstream associations, not access gates or live awards.

• [MARGIN] CME — Understanding margin changes — Initial and maintenance margin differ and requirements can change; fictional venue rules are not CME rules. Checked 2026-10-01; locator turn11view6.