Liability
A financial obligation or debt owed by an individual or entity.
A liability is a future financial obligation, such as margin requirements or unrealised losses on open positions. In trading, liabilities reduce available equity.
A liability is any financial obligation that must be settled in the future. In trading, liabilities include margin requirements, unrealised losses on open positions, and contractual obligations from derivatives. Understanding liabilities is critical for risk management because they represent claims on your capital that reduce available equity.
How It Works
- Opening a leveraged position creates a margin requirement liability on your account
- Unrealised losses reduce free margin and available equity
- Swap charges accruing overnight add to liabilities on the paying side of the rate differential
- If liabilities exceed equity, the broker issues a margin call or liquidates positions
Trading Tips
Track total liabilities (margin used + unrealised losses) against equity at all times
Keep margin utilisation below 50% to leave a buffer for adverse moves
Factor in overnight swap costs as a recurring liability when planning multi-day trades
Liability Example
Say you hold a short options position showing $200 of premium received with $2,000 of margin locked beside it. The $200 is yours for now. The margin is the exchange pricing the liability you carry if price explodes.
How Traders Use Liability
List every open liability before sizing anything new: margin locked, floating losses, overnight obligations. Accounts die when traders count assets and ignore what they owe.
Related Terms
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