Margin level is the core measure of how healthy a leveraged position is, defined as the ratio of a user's collateral value to outstanding debt. A higher value means a larger buffer and more safety; a lower value means the position is closer to liquidation and carries more risk.

What It Means

Margin level compresses a position's collateral-to-debt relationship into a single comparable number. It runs through the entire lifecycle of a leveraged position and is the same scale shared by three stages:

1. Open / add-margin check: after opening or adding to a position, its margin level must stay at or above the minimum threshold minMarginLevel (default 1.17), or the transaction is rejected.
2. Ongoing monitoring: users and front-ends use it to gauge in real time how much buffer remains before liquidation.
3. Liquidation trigger: when margin level drops to the liquidation level liquidateLevel (default 1.1), the position is considered undercollateralized and enters liquidation.

How It Is Calculated

The basic definition matches the Liquidation Mechanism:

Margin Level = Asset Value / Debt

• Asset Value: the position's collateral converted into the debt currency at the current reserve state
• Debt: borrowed principal plus accrued interest

Expanded into the form the protocol actually uses, asset value is a pure spot linear conversion based on reserve ratios:

positionValue = marginAmount + marginTotal          // position size (margin + leveraged part)
repayAmount   = positionValue × reserveBorrow / reserveMargin   // converted to the debt currency
marginLevel   = repayAmount / debtAmount

This conversion uses only the reserve ratio — it does not call AMM quotes, does not deduct LP fees, and does not account for price impact. That keeps the measure stable and easy to verify on-chain. (Internally the contract stores this ratio as a millionths fixed-point value; at the whitepaper level the ratio form is sufficient.)

The key detail is which reserves the conversion uses: the protocol uses truncatedReserves (anti-manipulation truncated reserves; see Truncated Oracles) rather than instantaneous pair reserves. This prevents an attacker from inflating reserves within a single transaction to dodge liquidation, and it keeps the margin level shown by front-ends aligned with the on-chain liquidation check by using the same data.

WARNING

Asset Value is the result of a reserve-based linear conversion and excludes LP fees and price impact; Debt is borrowed principal plus settled accrued interest. Both are measured in the debt currency.

Worked example (1000 LIKWID margin, 1× leverage, Long LIKWID):

positionValue = 1000 + 997 = 1997 LIKWID
repayAmount   = 1997 × truncatedReserve0 / truncatedReserve1
              ≈ 1997 × 0.000000015
              ≈ 0.00003 ETH
debtAmount    ≈ 0.00001541 ETH

marginLevel   ≈ 0.00003 / 0.00001541 ≈ 1.94

This position's margin level is about 1.94, which falls in the yellow "warning" range described below.

Health Thresholds (Red / Yellow / Green)

The front-end uses three color bands to indicate position health at a glance:

Color	Range	Meaning
🔴 Red / Danger	marginLevel < 1.17	At or near the minimum to open a position, very close to the liquidation level 1.1 — extremely risky
🟡 Yellow / Warning	1.17 ≤ marginLevel < 1.97	Still holdable, but buffer is limited — consider adding margin or reducing leverage
🟢 Green / Healthy	marginLevel ≥ 1.97	Ample buffer, relatively safe

WARNING

These two thresholds (1.17 and 1.97) are front-end display constants hardcoded to color the margin level — they are not on-chain contract constants.

The values that actually take effect on-chain are two others:

• minMarginLevel = 1.17 — the minimum margin level required after opening or adding to a position (the red line aligns exactly with it).
• liquidateLevel = 1.1 — the liquidation trigger (see Liquidation Mechanism).

The contract owner can adjust the on-chain liquidateLevel via setMarginLevel; if the on-chain parameters change, the front-end's red/yellow/green thresholds should be reviewed accordingly.

Relationship to the Liquidation Threshold

The three front-end color bands are a display-layer early warning that helps users sense risk in advance; they do not trigger any on-chain action. What actually decides whether a position is liquidated is the on-chain comparison of the margin level (computed from truncatedReserves) against liquidateLevel (default 1.1) — only when it drops to that line does the position enter liquidation. In other words, red does not mean "already liquidated," but "very close to the liquidation line — please act soon." For how liquidation is executed, see the Liquidation Mechanism.