What is Liquidation Price?

The liquidation price is the level of the mark price at which your position no longer has enough margin to stay open, so the exchange force-closes (liquidates) it. The higher your leverage, the closer this price sits to your entry.

For a long, the liquidation price is below entry; for a short, above it. It is driven by your collateral, position size, leverage, and the venue’s maintenance-margin requirement.

In delta-neutral funding arbitrage the two legs hedge price risk, but each leg still has its own liquidation price — an unexpected wick on one venue can liquidate that leg before the hedge can react, so conservative leverage matters even when "market-neutral".