Liquidation happens when there is no longer enough collateral to support a position and the position is automatically closed or reduced to prevent further potential losses.

If your total collateral reaches the minimum collateral required, the position will automatically be partially or fully liquidated. This can happen quickly in volatile markets, especially for positions with higher leverage.

• Partial liquidation happens first. If your total collateral falls to the minimum collateral required, part of your position is closed. Reducing the position lowers the amount of collateral it needs, so your position stays open at a smaller size.
• Full liquidation may happen if losses continue.

It’s important to closely monitor the position’s collateral health and ensure there’s enough collateral to support the position. If your total collateral nears the minimum required, adding collateral can reduce your liquidation risk. You can also close some or all of your position before your total collateral reaches the minimum required to avoid liquidation.

The Liquidation price shown on the perpetuals detail page is the estimated price at which your position may be partially or fully liquidated if the market moves unfavorably. Your liquidation price updates when you add or remove collateral and at each 15-minute settlement and may show as N/A when collateral fully covers the position.

There are various stages of position risk:

• At risk (yellow): Your position has more liquidation risk. Tap for options.
• High risk (red): Liquidation is imminent. If your total collateral is below the collateral required, orders that would increase your exposure are canceled and new ones are rejected.
• During liquidation: There will be a banner on the perpetuals detail page about the liquidation. You are restricted from trading the position until the liquidation is complete.
• Post-liquidation: Once total collateral is above the collateral required, you can trade normally again.

It is important to monitor your positions regularly and the estimated liquidation price, and stay aware of market volatility.

Robinhood offers tools to help you manage the risk of liquidation:

• Take profit (TP) and stop loss (SL) orders: You can set TP/SL levels to automatically close your position if it reaches a certain price, helping to manage potential losses or lock in gains.
• Add collateral: You can add collateral to your position to improve its collateral health and move the liquidation price further away from the current market price.
• Close position: You can choose to close your position manually at any time to prevent liquidation (if there aren’t already restrictions in place due to active liquidation).

• Auto-deleveraging: Profitable positions can be automatically liquidated to cover losses from other liquidations that can’t be fully covered by the market.
• Socialized loss: If a platform can’t cover losses from liquidations, the remaining losses may be shared across other traders with open positions in the same contract, subject to the rules of the platform.
• Automatic contract shutdown: If the market becomes unstable or in extreme circumstances, all positions in a contract may be liquidated.

The same commission charges are applied for liquidations; however, exchange fees may vary. Review Robinhood’s fee schedule for more information on fees.

Perpetuals are complex derivative products, and trading involves significant risk and is not appropriate for all investors, particularly for perpetuals referencing assets which experience volatile price movements. Further, leveraged trading is risky as it can amplify the speed of your losses and increases the chance of you losing all of your initial investment. Please carefully consider if investing in such financial instruments is appropriate for you in light of your specific experience, risk tolerance, and financial situation. Restrictions and eligibility requirements apply.