Polymarket Perps: Funding, Margin and Liquidation Without the Fog

Polymarket Perps are perpetual futures: leveraged long or short positions whose value follows an underlying asset, without an expiry date. They are not prediction-market shares and they do not resolve to $1 or $0.

That one distinction prevents a surprising amount of expensive confusion. A prediction asks whether an event happens. A perp keeps marking your position while the underlying price, funding, fees, and margin requirements continue to move. There is no final election result arriving to end the suspense. You close it, or the risk system may close it for you.

Affiliate disclosure: Business Dog may earn money if you open or use Polymarket through a qualifying link here. That does not change the math, the verdict, or the price you see. Yes, this link can make us money.

What are Polymarket Perps?¶

A perpetual futures contract tracks an underlying price but has no settlement date. You can go long when you expect the price to rise or short when you expect it to fall. Profit and loss move continuously with position size and price movement.

Current official documentation describes markets across equities, indices, commodities, and crypto. The actual instrument list, leverage cap, tick size, risk tiers, supported margin modes, and reference feeds are market parameters—not promises that belong in a static list. At our verification check, the public instruments endpoint returned 39 instruments. That count is an observation, not a permanent product fact.

Polymarket describes Perps as a hybrid system: order matching, margin, and funding run offchain; deposits and withdrawals settle on Polygon; and the exchange periodically posts state-root commitments onchain. This is mechanically different from Polymarket Predictions, where binary outcome tokens are matched on a CLOB and later resolve.

It is also different from Polymarket Combos, which combine several binary outcomes into one all-or-nothing prediction position. Similar brand, different risk engine, different vocabulary, different ways to discover regret.

How leverage and initial margin work¶

Leverage lets a smaller collateral amount control a larger notional position. If the position notional is 10,000 pUSD and configured leverage is 5×, the basic initial-margin calculation is:

Initial margin = Notional ÷ Leverage = 10,000 ÷ 5 = 2,000 pUSD

This does not mean 2,000 pUSD is the most you can lose, and it does not make liquidation occur at a tidy 20% move. Fees, funding, mark price, maintenance margin, other orders, risk tiers, and margin mode all affect the account state.

Polymarket applies leverage tiers as position size grows. Larger positions may have a lower permitted maximum leverage. The configured leverage applies to the whole position rather than to little bracket slices. Open orders also matter: pre-trade checks use worst-case exposure after considering the current position and resting orders.

Initial margin versus maintenance margin¶

Initial margin is the threshold for opening or increasing risk. Maintenance margin is the lower threshold for keeping the position alive.

The current official formulas are:

IM = Notional ÷ configured leverage

MM = Notional × MMR

MMR = 0.5 ÷ market maximum leverage

For a market with 20× maximum leverage, the maintenance-margin rate is 2.5%. Polymarket's documentation says this rate is flat for that market, independent of position size and the leverage setting you chose. Live market parameters still belong to the instrument endpoint.

Account equity is not merely the collateral number you remember depositing:

Equity = Collateral + unrealized PnL at mark − fees due − funding due

That is why a position can move between three states while your wallet remains emotionally attached to the original deposit:

1. Healthy: equity is at or above initial margin; normal trading is available.
2. Margin call: equity is below initial margin but at or above maintenance margin; risk must be reduced or collateral added.
3. Liquidation: equity is below maintenance margin; the system starts closing the affected position or account scope.

Isolated margin versus cross margin¶

Isolated margin gives one position its own allocation. Losses and liquidation are contained to that position's margin scope. You can add or remove allocation subject to current margin requirements.

Cross margin shares collateral and unrealized PnL across supported cross positions. A profitable position can support a losing one. The inverse is also true: one ugly position can consume collateral that was protecting the rest. Cross liquidation evaluates the combined cross account and can unwind multiple cross positions.

The current Perps FAQ says the web app opens new positions in isolated mode by default. Cross is opt-in through the API and only works for instruments that permit it; some markets are isolated-only.

Question	Isolated	Cross
What backs the position?	Dedicated position allocation	Shared cross-account collateral
What can offset a loss?	Value inside that isolated scope	Other cross collateral and PnL
Liquidation scope	The affected position	Potentially the full cross account
Current access path	Web default	API opt-in on supported instruments

CowDog tried to explain cross margin using six connected water bowls. We have asked facilities to stop him.

How Polymarket Perps funding works¶

Funding is the recurring transfer that encourages the perpetual price to stay near the underlying index. It is not an affiliate fee and Polymarket says the protocol takes no cut of the transfer.

The current process is:

1. Every five seconds, the protocol samples a premium from the order book using impact prices for 1,000 quote notional.
2. Those samples are averaged across a one-hour charge window.
3. The mean premium goes through Polymarket's documented interest-leg, scale, and clamp formula.
4. The resulting hourly rate settles against every open position at the end of the window.

When the perp trades above the index and the funding rate is positive, longs pay shorts. When the rate is negative, shorts pay longs. The rate is capped by the documented formula, but “capped” does not mean “small.” Funding continues across sessions, including when an underlying reference market is closed.

Mark price, index price, and last trade price¶

These three numbers have different jobs:

• Index price estimates the underlying's fair value from external price feeds.
• Mark price is the system price used for equity, unrealized PnL, margin, funding inputs, and liquidation checks.
• Last trade price is simply the latest fill on the Perps order book. It is not the liquidation trigger.

Polymarket currently updates mark price every 200 milliseconds. It takes the median of three candidates: an order-book midpoint adjusted toward the index, recent-trade behavior adjusted toward the index, and external derivative-market marks. Candidate fallbacks converge toward the index when inputs disappear.

The median design makes it harder for one wild trade or one broken source to drag the risk system around by the collar. It does not remove market risk, oracle risk, or fast movement.

When does liquidation happen?¶

Liquidation starts when the margin ratio drops below one:

Margin ratio = Equity ÷ Maintenance margin

Liquidation when Equity < Maintenance margin

Cross and isolated positions are checked separately. Isolated liquidation flags only the affected instrument. Cross liquidation flags the cross account, blocks new cross orders, cancels resting orders in scope, and selects positions to unwind across re-evaluation cycles.

Normal liquidation orders are reduce-only, immediate-or-cancel, and market-priced. They sweep whatever liquidity is available; there is no protective distance from mark. Severe breaches can move directly to the insurance-fund backstop. If the fund cannot safely absorb the exposure, auto-deleveraging can reduce profitable, leveraged accounts on the opposite side.

That is why this launch does not include a cheerful one-input “liquidation calculator.” An exact account result can depend on:

• live mark price and position size;
• market-specific maximum leverage and risk tiers;
• cross or isolated scope;
• other cross positions and collateral;
• open orders;
• fees and funding due;
• margin changes and partial liquidation fills.

A simple isolated-position estimate can teach intuition, but labeling it “your liquidation price” would overstate what the inputs establish. CowDog is a dog, but even he has standards.

What do Polymarket Perps fees cost?¶

Each fill uses:

Fee = absolute value of (price × quantity) × fee rate

The rate comes from the account's trailing 30-day volume tier and whether the fill made or took liquidity. Tiers are re-evaluated daily in UTC. New standard accounts begin at a 0.0400% taker rate and 0.0125% maker rate. The published schedule falls across seven tiers; at the $1 billion tier, the taker rate is 0.0200% and the maker rate is −0.0050%, a rebate.

Opening and closing are separate fills, so both can create fees. Funding and liquidation costs are separate. Use the Perps fee calculator for every current published tier and a worked round-trip example.

A practical pre-trade checklist¶

Before using leverage, write down the answers where the excitement cannot edit them:

• Which instrument is this, and what do its current risk tiers permit?
• Is the position isolated or cross?
• Which price triggers margin checks?
• When is the next funding settlement, and who currently pays?
• What are the entry and intended exit fill fees?
• How wide and deep is the order book for your size?
• What invalidates the trade before liquidation does it for you?
• Is the product legally and technically available where you are?

If the plan begins with “I will use maximum leverage because the stop is close,” also write down what happens when the stop slips, rejects, or fills partially. Software can enforce margin. It cannot enforce wisdom.

Sources

1. Polymarket — Perps Overview
2. Polymarket — Perps Markets
3. Polymarket — Perps Fees
4. Polymarket — Margin
5. Polymarket — Liquidation Mechanics
6. Polymarket — Funding
7. Polymarket — Mark Price
8. Polymarket — Index Price
9. Polymarket — Perps FAQ