Margin and liquidation
In one paragraph: To open a leveraged position you must hold initial margin; to keep it you must hold maintenance margin. Both are computed on chain from your position's notional at the mark price M, not from a leverage slider. If your equity falls below maintenance, anyone may liquidate you through the order book, a small penalty is taken, and any remaining equity stays yours. If the book cannot absorb the loss, a funded backstop and then auto-deleveraging of profitable traders cover the rest.
Applies to perpetuals only. Capped-option buyers are never liquidated and writers post full collateral up front. No perpetual is listed on Robinhood Chain today; this page describes the perp mechanism as designed and deployed. See status.
Equity
equity = trading cash + free cash + unrealized PnL at M
Funding that has accrued but not yet settled is included before any risk decision. Equity uses M, never the last trade.
Initial and maintenance margin
The candidate "Template A" schedule is marginal, like tax brackets, on notional N with a per-market threshold T:
| Notional slice | IM rate | MM rate |
|---|---|---|
| 0 to T | 25% | 12.5% |
| T to 2T | 50% | 25% |
| above 2T | 100% | 50% |
MM = IM / 2. Small positions get up to 4x leverage; large ones get progressively less. T is uncalibrated for production in the spec, which is one reason no perpetual is listed; a local development deployment uses a test value. If T is zero the contract applies the top tier (100% IM) to everything, which is the fail-closed default. GRID, HASH and DPIN in the deployment script use a steeper 50/75/100% schedule and the spec says they must be calibrated to lower leverage than Template A.
When the market is INDEX_ONLY (book too thin), IM is at least 50% of notional regardless of tier.
Note: the order form's "Order Value ÷ Leverage" preview is a simplification. The contract's RiskV2.requirements is the binding number.
Worked example (hypothetical)
Assume T = $10,000. You hold 5,000 CT CMPT long, entry $2.60, and the mark is $2.60. Notional N = $13,000.
- IM = 25% × 10,000 + 50% × 3,000 = $4,000
- MM = $2,000
You deposited $4,500. Equity $4,500 ≥ IM $4,000, so the position could be opened. Mark falls to $2.10: unrealized loss $2,500, equity $2,000, notional $10,500, MM now $1,312.50. Still above MM. Mark falls to $1.95: loss $3,250, equity $1,250, MM $1,218.75 (notional 9,750 → all tier 1). Still just above. At about $1.94 equity drops below MM and you are liquidatable. The contract exposes this as RiskView.liquidationPrice.
Liquidation, step by step
- Trigger. After funding is applied, fresh M gives
equity < MM. Equality is not liquidatable. Your risk-increasing orders are cancelled. - Book-first closeout. A permissionless caller executes real maker orders inside ±3% of I and ±3% of M, only the smallest slice that restores IM. No depth means no fill; there is never a synthetic fill at the mark.
- Penalty.
min(50 bps × executed notional, your remaining positive equity), paid to the backstop vault. No normal taker fee on top. Whatever equity is left stays with you. - Backstop. If the book attempt fails or your equity is below two-thirds of MM, the funded vault may assume the position within its approved cap.
- Bankruptcy. If losses exceed your cash, the shortfall is debt, covered by real backstop funds.
- ADL. If the backstop is exhausted, the most profitable, most leveraged opposite positions are reduced at the bankruptcy price, ranked on chain. Losses are clipped to their profit. Flat depositors are never touched.
- Deficit. If even ADL cannot cover it, a deficit is declared and the market stays in resolution. It is not hidden.
What this does not promise
- No insurance. The backstop is whatever capital was actually deposited; the spec explicitly says an unfunded vault is not insurance. On 4663 the funded requirement is currently zero.
- No guaranteed exit. Liquidation depends on other users' orders.
- No liquidation during a halt. A halted market freezes both your losses and your ability to leave with a position.
Source trail: overdrive/perps/src/v2/RiskV2.sol (_calculateRequirements, evaluate, _computeLiquidationPrice, TEMPLATE_A_*); overdrive/perps/src/v2/CloseoutRouterV2.sol (MAX_PENALTY_BPS, PRICE_BAND_BPS, liquidate, backstop); overdrive/perps/src/v2/BackstopVaultV2.sol; overdrive/perps/src/v2/AdlQueueV2.sol; docs/spec/V2_ARCHITECTURE.md §3.6, §6.1; overdrive/perps/script/DeployV2.s.sol.
Repository-owned documentation · September 2026 · Educational material, not investment advice and not an audit.