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SITCHY

Situational Awareness for the rest of us.

The Situational Simulator

The only page here that will do you any good.

A levered position has two prices attached to it. The first is the price you think the asset is worth, which you have thought about a great deal. The second is the price at which the position is taken away from you, which most people have never calculated.

Only the second price is enforced. It is enforced automatically, by a system that has not read your thesis. Enter a position below and the simulator will tell you what it is.

Type any amount. Whole dollars; commas are added for you.

1 = unlevered. Exchanges will happily sell you 100.

Display only. The arithmetic is identical for every asset.

Move in the underlying at which you close.

The formula

This is not a black box. With equity E, leverage L, and maintenance margin m, a long position is liquidated when equity falls to the maintenance requirement on the current notional:

E(1 + L·r) = m · E · L · (1 + r)  ⇒  rliq = (mL − 1) / (L(1 − m))

At L = 4 and m = 0.5%, that is (0.02 − 1) / (4 × 0.995) ≈ −24.6%. Every exchange uses this same relationship. Nothing about it is proprietary and nothing about it is negotiable.

What the numbers show

  • Leverage compresses the deadline, not the analysis. A 4x position and a 1x position express the same view. Only one of them can be closed by somebody else.
  • The buffer shrinks fast. 4x gives roughly 24.6%. 10x gives roughly 9.6%. 20x gives roughly 4.5%. Try them.
  • Most stop-losses are decorative. Set a 30% stop on a 4x position and the simulator will tell you plainly that it will never fire.
  • Being right later is not a defence. The position is closed at the price, not at the thesis.

This is not advice about what to buy, and it is not encouragement to lever up. It is arithmetic about what happens after you do. If the number surprises you, that is the finding.

The same idea applied to the market as a whole is on the terminal.

Nothing on this page is financial advice and no figure here predicts a price. The arithmetic is real; the conviction is ours. Use your situational awareness.