A liquidator can trigger liquidation if an account's Margin Ratio(MR) breaches the Maintenance Margin Fraction (MMF). The Maintenance Margin currently being used by the protocol is 6.25%.
Liquidation Price can be calculated for each position based on position size and amount.
For Longs,
$$ LiquidationPrice= (|EscrowedAmount - PositionValueAtOpen|)/((1-MMF)*PosSize) $$
For Shorts,
$$ LiquidationPrice= (|EscrowedAmount + PositionValueAtOpen|)/((1+MMF)*PosSize) $$
Where, EscrowedAmount tracks the deposited/withdrawn balance.
All of the margin will be taken as a liquidation penalty. The protocol and liquidators share the penalty earned. The protocol would take 80%, whereas the liquidator would earn 20% of the margin liquidated.
<aside> 💡 Consider Alex deposits 100 ETH and opens a short position of 100 SNV. His opening price is 10 ETH.
He opened the position using max leverage, and his Margin Ratio was 10%.
His Liquidation Price equals 1100/(1.0625*100) = 10.3529ETH.
This implies that he'll be eligible for liquidation as soon as the price hits 10.3539ETH.
</aside>
→ The protocol's share on liquidation = 100*0.8 = 80ETH
→ The liquidator's share on liquidation = 20 ETH