# How to Calculate Contract Bankruptcy Price

What is Bankruptcy Price?

In futures trading, unrealized profits and losses can occur. The bankruptcy price corresponds to a situation where the position margin becomes zero. When the user's position reaches the liquidation price, KuCoin forcibly takes over the position. Since it's not guaranteed that the position can be closed at the liquidation price at the takeover moment, KuCoin will take over the position at the bankruptcy price. If the actual closing price is better than the bankruptcy price, the excess amount goes into the insurance fund. If the actual closing price is worse than the bankruptcy price, the shortfall is covered by the insurance fund. KuCoin does not profit from this process.

How to calculate bankruptcy price?

The calculation for the bankruptcy price of USDT-margined contracts is as follows:
Long position bankruptcy price = average entry price × (1 - Initial margin rate)

Short position bankruptcy price = average entry price × (1 + Initial margin rate)

Initial margin rate = 1 / leverage multiple

Example

When the BTC/USDT contract price is 28,000 USDT, user A opens a short position with a leverage of 100. The expected bankruptcy price of this position = 28,000 × (1 + 1%) = 28,280 USDT

The calculation for the bankruptcy price of coin-margined contracts is as follows:

Long position bankruptcy price = average entry price / (1 + Initial margin rate)

Short position bankruptcy price = average entry price / (1 - Initial margin rate)

Initial margin rate = 1 / leverage multiple

Example

When the BTC/USD contract price is 28,000 USDT, user A opens a long position with a leverage of 50. The expected bankruptcy price of this position = 28,000 / (1 + 2%) = 27,450 USDT.

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