Trading
Collateral and margin
How much a position locks, when it can be liquidated, and how to read the liquidation line.
What a position locks
Both sides of a swap lock USDC, and each side's balance is its own. Settlement moves money between the two balances; nothing else touches them until the position closes.
Two requirements apply to each side:
- Initial margin, checked when a quote is posted and again when it is taken.
- Maintenance margin, checked at every checkpoint while the position is open.
Each is the larger of a floor, a share of notional, and a stress loss: what the side would lose to maturity if funding moved against it by the market's shock rate on top of the fixed rate.
initial = max(25% × N, 2 × stress)
maintenance = max(10% × N, stress)
The percentages are the floors on the maturities Tack lists and the lowest the program allows any market to use; the shock rate there is 100% a year. Time left runs to maturity plus the market's maxAge, 15 minutes on Tack's maturities, as a margin of safety.
$10,000 notional
stress loss, 7 days: $203.59
twice the stress loss: $407.18
An example
A $10,000 lot at 6% with seven days to maturity:
| Amount | |
|---|---|
| Stress loss | $10,000 × (6% + 100%) × 7 days 15 min ÷ 365 days = $203.59 |
| Initial margin | max($2,500, 2 × $203.59) = $2,500 |
| Maintenance margin | max($1,000, $203.59) = $1,000 |
At the shock rate and tenors Tack uses, the floors are almost always the larger: a 31-day position at a 100% shock needs a fixed rate above about 47% a year before its stress loss passes the initial floor. In practice, opening locks a quarter of the notional and the position stays open while its balance is above a tenth.
The liquidation line
The ticket and each position show Liquidates if floating averages above or below a rate. It is the constant floating rate that, held from now to maturity, would take the balance down to the maintenance floor at maturity:
line = K ± (balance − 10% × N) ÷ (N × time left)
For the example above, receiving fixed with the minimum $2,500: the headroom is $1,500, and $1,500 ÷ ($10,000 × 7 ÷ 365) is 782% a year. The position is liquidated if funding averages above 788% a year until maturity.
Adding collateral
Open a position's row and use Top up to add USDC to your side. A top-up first settles every checkpoint the position has not seen; the app includes up to eight in the same transaction. If the position is more than eight behind, settle it first.
A top-up cannot undo the past. If the position was already below maintenance at a checkpoint it had not settled yet, settling that checkpoint closes it, and the top-up fails.
What happens below maintenance
When settlement finds a side below maintenance at a checkpoint, the position closes at that checkpoint with status Closed at maintenance. Nothing is sold and no one takes a cut: both sides keep the balances they had after that checkpoint and withdraw them. The side that was not liquidated gets the result up to that point, not the fixed return it expected to maturity.
If a loss is larger than the losing side's whole balance, the winner receives that balance and the position closes as Collateral exhausted. Maintenance and default covers both cases in detail.