Leverage, Funding and Liquidation on Polymarket Perps: The Risk Math

Perps look simple — pick a direction, pick leverage — but every part of your risk is a formula, and the formulas are public. This is the risk math of Polymarket Perps from the official documentation as of September 2026, with worked examples. Numbers and parameters can change (Perps launched broadly on September 3, 2026, and the product is still evolving), so treat this as the map, and the live app as the territory.

The number that matters: equity

Everything keys off account equity:

Equity = collateral + unrealized PnL at the mark price, minus fees due, minus funding due.

Two details people miss. First, unrealized PnL uses the mark price, not the last traded price — you can be liquidated by the mark even if the order book last printed somewhere friendlier. Second, fees and funding owed are subtracted continuously, so a position bleeding funding is losing equity even when price goes nowhere.

Margin: how much the position demands

Initial margin (IM) — what you post to open: IM = notional divided by leverage. 2,000 pUSD notional at 10x means 200 pUSD IM.

Maintenance margin (MM) — the floor that keeps the position alive: MM = notional times (0.5 divided by the market's max leverage). On a 20x-max market that's 2.5% of notional.

Leverage tiers also cap max leverage as positions grow — bigger positions must carry proportionally more collateral.

Worked example: how far to liquidation?

Say you deposit 100 pUSD into an isolated position on a market whose max leverage is 20x (MM rate 2.5%).

At 10x: notional 1,000 pUSD, MM 25 pUSD. Liquidation begins when equity falls below 25 — roughly a 7.5% adverse move (75 pUSD of unrealized loss on 1,000 notional), before counting fees and funding.

At 20x: notional 2,000 pUSD, MM 50 pUSD. Now only about a 2.5% adverse move (50 pUSD of loss on 2,000 notional) puts you into liquidation.

Same deposit, double the leverage, one-third the survivable move. On index and equity perps, 2.5% is an ordinary day. That's the entire risk story of leverage in two bullets.

Between healthy and liquidated sits the margin call state: equity below IM but above MM. There you can only reduce exposure or add collateral — no new risk.

Funding: the hourly bleed

Funding settles every hour, computed from how far the perp trades from the index price (the docs sample the order book's impact price every 5 seconds and average the premium over the hour, add a small fixed interest leg of 0.01% per 8 hours, halve the result for non-crypto assets, and cap the hourly rate at plus or minus 4%). Positive rate: longs pay shorts. Negative: shorts pay longs. The transfer is trader-to-trader with no protocol fee.

The math that matters to you: funding payment is proportional to notional, but you experience it against equity. Take the 20x example — 2,000 notional on 100 equity — with a modest 0.01% hourly rate:

Per hour: 0.20 pUSD. Sounds like nothing.

Per day: 4.80 pUSD — 4.8% of your equity, daily, if the rate persists and you're on the paying side.

And 0.01%/hour is calm weather. The cap is 4% per hour: in a badly dislocated market, a capped rate on that same position would be 80 pUSD per hour — your entire stack in about 75 minutes, without price moving at all. Extreme, rare, but the mechanism exists precisely for extremes.

Fees: small percentages, multiplied by leverage

Base-tier fees as of September 2026: 0.0400% taker / 0.0125% maker, charged on notional per fill. At 1x that's noise. At 20x, a taker open plus a taker close is 0.04% times 2 times 20 = 1.6% of your equity in round-trip fees. High-leverage scalping starts every trade meaningfully behind.

Liquidation: what actually happens

Liquidation is a process, not a single event, per the official liquidation docs:

The engine flags the account when equity falls below MM (margin ratio below 1).

It blocks new orders in scope and cancels your resting orders.

It closes the position with reduce-only, immediate-or-cancel market orders. Partial fills that lift equity back above the recovery threshold can stop the process early.

Every liquidation fill pays the normal trading fee plus a per-market liquidation fee — so liquidation itself costs extra, right when you can least afford it.

If equity has fallen so far the position is under water, the insurance fund can absorb it; failing that, auto-deleveraging force-closes traders on the profitable opposite side (most profitable, most leveraged first).

Two takeaways. Liquidation fills at whatever the book gives — in fast markets the engine can exhaust your collateral entirely, and the docs make no promise that losses conveniently stop at some comfortable buffer above zero. And because everything runs off the mark price, a spike in the mark can trigger the process even if the traded price barely printed there.

The pre-trade checklist

Compute your liquidation distance before opening: roughly (equity minus MM) divided by notional, as a percent. If a normal daily move covers it, your leverage is too high.

Check the current funding rate and who's paying. You might be paid to hold your side — or bleeding 4-5% of equity a day.

Prefer isolated margin while learning: it caps the damage to that position's allocation instead of your whole account.

Size so fees don't matter: if a 1.6% round trip changes the trade's viability, the trade was too thin.

Never post collateral you can't afford to lose entirely.

Eligibility note: Polymarket blocks Perps order placement in the United States and Canada (per its official documentation as of September 2026), and the main platform carries separate restrictions in the UK, Australia and elsewhere. If you're in a restricted region, Perps won't be tradable for you — and circumventing geo-restrictions violates Polymarket's terms.

If the math above reads like a warning, good — it is one. It's also exactly the information you need to trade perps deliberately instead of accidentally. See the mechanics live: open Polymarket Perps, start at low leverage, and keep this page open next to your first position. For the basics first, read the complete Perps tutorial.

Risk notice: Perps are leveraged derivatives. Funding costs accrue hourly, liquidation can close your position automatically, and you can lose your entire deposit — liquidation is not a guaranteed stop-loss. Nothing here is investment advice. Formulas and parameters cited from docs.polymarket.com/perps as of September 2026 and may change. We may earn a commission when you sign up through links on this site — this never affects our coverage.