Generally speaking, when the position risk of futures is higher than 100% or the margin is lower than the minimum standard, investors need to add margin. If they don't add margin, they will be forced to close their positions, so they will not close their positions according to losses. For example, the margin rate of long and short positions of SSE 50 stock index futures is 10%, and the margin rate of CSI 500 long and short positions is 15%. If investors buy SSE 50 stock index futures, the margin below 10% will be closed.

Forced liquidation requires the following conditions:

First, the customer's trading margin is insufficient, which has exceeded the bottom line of risk control, and the market continues to develop in the direction of unfavorable positions. This is the basic premise for futures companies to implement compulsory liquidation in order to protect their own interests and prevent losses from expanding.

The second is to correctly fulfill the notification obligation of additional margin, which is a necessary procedure for futures companies to implement compulsory liquidation.

Third, the time and amount of additional margin should be reasonable.

Liquidation is a term derived from commodity futures trading, which refers to the trading behavior of one party in futures trading to cancel the futures contract bought or sold before. Closing a position is a general term for selling stocks bought by bulls or buying back stocks sold by bears in stock trading.

Closing positions can be divided into hedging closing positions and forced closing positions. Hedging liquidation refers to the liquidation of futures contracts previously sold or bought by futures investment enterprises by buying futures contracts on the same futures exchange and selling futures contracts in the same delivery month. Forced liquidation refers to the forced liquidation of the position of the holder by a third party other than the holder (futures exchange or futures brokerage company), also known as liquidation or liquidation.

basic concept

The whole process of futures trading can be summarized as opening positions, holding positions, closing positions or physical delivery. Opening a position, also known as opening a position, refers to the new purchase or sale of a certain number of futures contracts by traders. Buying and selling a futures contract in the futures market is equivalent to signing a forward delivery contract. If traders keep futures contracts until the end of the last trading day, they must settle futures transactions by physical delivery or cash settlement.

However, only a few people make physical delivery, and most speculators and hedgers generally choose to sell their futures contracts or buy back their futures contracts before the end of the last trading day.

That is to say, the original futures contract is written off by a futures transaction with the same amount and opposite direction, thus ending the futures transaction and relieving the obligation of physical delivery at maturity. This behavior of buying back a sold contract or selling a bought contract is called liquidation.

Closing position refers to the behavior of futures investors to buy or sell stock index futures contracts with the same variety, quantity and delivery month, but in the opposite direction, in order to close the stock index futures trading. It can also be understood as: liquidation refers to the trading behavior of traders, and the way of liquidation is to hedge the position direction.

Closing a position in futures trading is equivalent to selling in stock trading. Because futures trading has a two-way trading mechanism, there are two kinds of closing positions: buying and closing positions (corresponding to selling and opening positions) and selling and closing positions (corresponding to buying and opening positions).