What Is An Insurance Fund

Insurance Fund

The Insurance Fund acts a defense against Contract Loss and avoiding ADL from being triggered.

For Long Position

For example, Jo has a long position with Liquidation Price at US$7500 and the Bankruptcy Price at US$6800. Once the Mark Price hits the Liquidation price, the order will get liquidated.

If the position closed at US$7100 which is higher than US$6800 (i.e Liquidation Price), the remaining margin will transfer into the Insurance Fund. If the position closed at US$6770 which is lower than US$6800, funds will be transferred from the Insurance Fund to cover the contract loss.

 

 For Short Position

 

For example, Lee has a short position with Liquidation Price at US$6900 and the Bankruptcy Price at US$7110. Once the Mark Price hits the Liquidation price, the short position will get liquidated.

For a short position, if the position closed at US$7100 which is lower than US$6900 (i.e the Liquidation Price), the remaining margin will transfer into the Insurance Fund. If the position closed at US$7200 which is higher than US$7100, funds will be provided by the Insurance Fund to cover the contract loss.

 

Share

Share on facebook
Share on linkedin
Share on telegram

Related

Add Your Heading Text Here