Forced liquidation is also called forced liquidation, also known as being liquidated/being liquidated/liquidating the position. According to the different entities that implement forced liquidation, forced liquidation can be divided into forced liquidation by exchanges and forced liquidation by brokerage companies. It is often used in spot gold and futures transactions.

Based on the different reasons for forced liquidation, forced liquidation can be divided into the following categories:

1. Forced liquidation due to failure to fulfill margin call obligations.

2. The position was forcibly closed due to violations. If a member or customer violates the trading rules of the exchange, the exchange has the right to forcefully liquidate the illegal position in accordance with the provisions of the trading rules.

Mainly include: violating position limits and overtaking positions; violating the large-holder reporting system by failing to report, or reporting falsely; conducting futures business for persons banned from the market; brokerage companies engaging in self-operated business; collaborating to manipulate the market; and Other violations that require forced liquidation.

3. Forced liquidation of positions due to temporary changes in policies or trading rules. In the past few years, this situation often occurred, and trading rules were often modified due to policies or temporary regulations from regulatory authorities, or were temporarily unable to be executed normally.

Extended information

The consequences of forced liquidation:

If the investor fails to close the position before 11:30 a.m. on the next trading day or If the margin and underlying securities are replenished and the time limit for forced liquidation is exceeded but the execution is not completed, the remaining portion will be directly liquidated by the option operating institution. Forced liquidation means that investors permanently lose the options that were liquidated and can no longer enjoy the profits or losses of that part.

For option investors, they should pay attention to the changes in the balance in the account at ordinary times, be aware of it, and make up funds in a timely manner in the event of insufficient margin. Below we will mainly elaborate on the situation of forced liquidation due to insufficient margin.

Baidu Encyclopedia-Forced Liquidation