Stock Perpetual Risk: Margin, Mark Price, Liquidation and Position Size

2026-09-21

On a stock perpetual, the number that decides whether a position survives is almost never the number printed on the order book. Liquidation runs on a mark price, that mark is anchored to an index, and the index depends on a market that is shut for most of the hours in a week. Margin, sizing and the overnight gap all follow from that one arrangement.

Stock Perpetual Risk: Margin, Mark Price, Liquidation and Position Size: three prices, one buffer, one calendar

Three Prices, and Only One of Them Closes Positions

A stock perpetual carries three prices at once, and treating them as one number is an expensive habit.

The last traded price is a fact about a single fill: the most recent trade on the contract's own book. It is what the chart draws, and one determined order can move it.

The index price is the reference taken from the market the contract tracks, built from the underlying share as reported by the sources the venue selects.

The mark price is the valuation the venue applies to open positions. Unrealised profit and loss, the margin ratio and liquidation are all measured against it.

Price	What it is	What it decides
Last traded	The most recent fill on the contract	The chart, and where a market order lands
Index	The reference taken from the underlying market	What the mark is anchored to
Mark	The venue's valuation of open positions	Profit and loss, margin ratio, liquidation

Liquidation runs on the mark rather than on the last trade for a plain reason. A perpetual's own book is thinnest exactly when the underlying market is closed; if the last fill were the trigger, one aggressive order could set liquidations off, and each of them would send more orders into the same book. Anchoring the trigger outside the contract makes that loop far harder to start. The general mechanics are in mark price versus index price.

So a position can be closed at a level that never traded on the contract, and it can show a loss long before any of it has been realised.

What the Mark Does While the Stock Market Is Shut

A crypto perpetual references a spot market that never closes, so its index always has a fresh trade to work with. A stock perpetual references a market that shuts every weekday evening, all weekend and on holidays. For most of the hours in a week, the underlying produces no new prices at all.

What a venue does with its index and its mark during those hours, which sources it falls back on and whether funding keeps accruing, is a venue parameter rather than a property of the instrument. It lives on the contract rules page of the platform being traded.

Why the closure matters more here than it does to a shareholder needs no rules page. Companies release most of their price-moving information while their own market is closed. Earnings land after the bell or before the open by design, guidance and filings follow the same calendar, and macro releases arrive before trading starts. A share does much of its moving when nobody can trade it, so the first price of a session is a new price rather than a continuation of the last.

One closure therefore produces two jumps. The first happens in the contract: news arriving overnight is priced entirely in the derivative, on a thinner book than the session had. The second arrives when the underlying reopens and the index takes its first genuine print of the day, and the mark follows it there. A position can survive the first jump and be closed by the second.

Margin Is a Buffer, and Liquidation Is the Moment It Runs Out

Two requirements sit on every leveraged position. Initial margin is what has to be posted to open it; maintenance margin is the floor that must remain behind it for the venue to keep carrying it. Both are set per venue, per contract and usually per size band, both get adjusted, and no guide should quote either.

The mechanism is the same everywhere. The venue values the position at the mark, applies the margin posted, the funding debited and the fees charged, and compares what is left against the maintenance requirement. Liquidation is a bookkeeping event rather than a market event: it fires when that comparison fails, whether or not anybody wanted to trade there. The arithmetic is in liquidation price and leveraged profit and loss, and the requirement itself in margin requirements and the margin call.

Interfaces present that level as fixed. A liquidation price is an estimate that moves. It moves when margin is added or withdrawn, when funding is debited period after period, when fees accrue, and when a change in size moves the position into another band. Under cross margin it also moves when positions unrelated to this one start losing money.

Isolated and Cross Change the Shape of the Risk, Not Its Size

Isolated margin ring-fences a position: its assigned margin is the whole buffer, so liquidation arrives sooner and that margin is what is at stake. Cross margin lets the rest of the balance defend the position, so liquidation arrives later and the balance is what is at stake. Neither setting makes a position smaller, and neither changes what a price move costs. The full comparison is in cross margin versus isolated margin.

On a stock perpetual that choice also interacts with the calendar. Several stock positions held under cross margin do not merely share a balance; they usually share one closed window and one opening. Names that behaved independently through the session can be repriced by the same macro release at the same minute, because the markets they reference reopen together. Correlation that looked like diversification during the day becomes, at the open, one position drawing on one buffer.

Sizing Backwards, in Four Steps

The stock perpetual guide makes the structural case that size, not leverage, is the dial that changes outcomes. Turning that dial works backwards: the size is not chosen first and checked afterwards, it comes out last.

Step	The question it answers	What comes out
One	How much may this position lose?	An amount, decided in advance
Two	At what price would the idea be wrong?	A level, taken from the thesis
Three	How far is that level from the entry, per unit?	A distance
Four	The allowed loss divided by that distance	The size

Suppose the position is allowed to lose $100 and the level that would prove the idea wrong sits $4 away from the entry on each unit of exposure. Dividing the first by the second gives twenty-five units, and that is the whole calculation. Both figures are assumed here: the first is a decision, the second comes off the chart.

The step that gets skipped is the next one. A size is only finished once the liquidation level has been checked against it. Feed the size back into the margin the venue requires, find where liquidation would sit, and compare it with the level from step two. If liquidation sits nearer to the entry, the venue closes the position before the idea has been tested, and the size rather than the thesis decided the outcome.

Then comes the comparison the calendar forces. Measure the distance from entry to liquidation against the distance a share can travel between one close and the next open. If an ordinary overnight move reaches that level, the position has been sized for the session and not for the night, and it will spend most of its life in the night.

What the Rules Page Has to Answer

Four answers decide whether any of this behaves as expected, and not one can be inferred from a crypto perpetual: how the mark price is built and what becomes of it while the underlying market is closed; the maintenance requirement at the size actually being traded, not at the smallest band; whether funding accrues through a closure, since a cost that runs while the reference stands still changes what a weekend is worth; and what happens on a deficit, meaning whether a loss can exceed the margin posted.

The mechanism is shared with every other perpetual; the parameters are not.

The Bottom Line

Three prices, one buffer and one calendar explain most of what goes wrong on a stock perpetual. Liquidation runs on the mark, the mark follows an index that goes quiet every night, and the size of the position decides what that silence costs. Sizing backwards from an allowed loss, then checking the liquidation level against a realistic overnight move, is the part a trader controls. Everything else sits on the venue's contract rules page, which supersedes any guide, this one included.