There are many reasons for compulsory liquidation in futures trading, such as customers' failure to add trading margin in time, violation of trading position restrictions and other irregularities, temporary changes in policies or trading rules, etc.
In the standardized futures market, it is most common that customers are forced to close their positions because of insufficient trading margin. Specifically, it refers to the behavior that a futures company forcibly closes some or all of its customers' positions in order to avoid losses. When the trading margin required by the customer's position contract is insufficient, the futures company fails to add the corresponding margin in time according to the futures company's notice or actively reduce the position, and the market situation is still developing in an unfavorable direction, the obtained funds are used to fill the margin gap.
Any financing transaction may lead to huge losses. The worst result is that you not only lose all the principal you invested, but also lose different amounts of money to the borrower after you wear the warehouse.
Examples are as follows: Take the conventional margin financing and securities lending business of securities firms as an example, and the liquidation line is 120%. Closing line = total market value/total liabilities: self-owned investment is 654.38+0 million, and loan is 654.38+0 million. When the total market value drops to 6.5438+0.2 million, investors will be liquidated if they can't add margin.
If the liquidation is successfully sold, then after the liquidation, you pay off the financing liabilities of the brokerage firm, and your own funds are still 200,000.
If the liquidation is not smooth, such as continuous limit, and the total assets are only 600,000, then your own principal will be gone, and you still owe the broker 1 10,000-600,000 = 400,000.
This is predicted according to the lever of 1: 1. Higher leverage 1: 3, 1: 5 or even 1: 10 is more likely to lose the principal and be heavily in debt.
Give another example.
Assuming that the leverage is 10%, the basic price of the commodity is 5,000 yuan, and your principal is deposited in 1000 yuan, then theoretically your forced liquidation is the moment when your principal is 0 yuan. For example, if you buy a second-hand commodity (the margin is just 500*2= 1000 yuan), and the price of this commodity drops to 4500 yuan, then the principal of your account is.