1

When using margin on an exchange, is there a function that one can run ( hopefully using python ) that can calculate the Liquidation Price Level when entering

  1. How much to spend and
  2. the Margin level chosen (like 10X, 20X, etc.) and
  3. the current price of the asset (ex: 32000 for bitcoin)

Am open to other possible options as well.

TIA

0
0

When dealing with leveraged positions, a universal formula worth burning into your memory:

100% divided by leverage ratio

For a case of 20X that's 100% / 20 = 5%. This means that if the price moves 5% against you, you lose 100%. (Conversely, if it moves 5% in your favor, you've doubled your investment.)

In your case, 5% of 32000 is 1600, so a price of 32000 - 1600 = 30400 is the theoretical liquidation.

In practice, brokers will liquidate you sooner than that to insure themselves from rapid price movements - you have to see particular details of the broker/exchange you're using as the rules may vary.

1

Here's an explanation of how traditional margin is calculated for initial margin and maintenance margin in the US. In short, the margin amount is equity divided by market value.

You can set this up in a spreadsheet and there are web sites that offer the same. Here's a margin call calculator.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.