A leveraged margin position is a spot trade executed through an advance financed by Kraken. For example, a long XBT/EUR position is opened by advancing the trader EUR to buy XBT in a spot trade. And a short XBT/EUR position is opened by advancing the trader XBT to sell for EUR in a spot trade. To close the position, the funds advanced to the trader must be returned to Kraken.
One way to return the funds is by executing an opposing trade to acquire the advanced asset from the market (a sell order to close a long position or a buy order to close a short position).
Another way is to return the advanced funds directly from the trader’s account balance with no trade involved - this is position settlement. Returning the advanced funds in settlement effectively replays the trade from your own balance. Upon completion of a position settlement, you will have swapped out Kraken’s advance for your own assets. Thus, position settlement effectively allows clients to close all or part of a position by buying or selling at the same price the margin position was opened at. Position settlement is executed with a special order type. It is found only in the advanced order form UI (as “Settle Position”) or through the API (as “settle-position”).
To settle a long position: Create a Buy Settle Position order. Simply choose the amount you want to settle (up to the total size of your long positions) and select any level of leverage. In the example below, a Buy Settle Position order for 5 bitcoins is created. The bitcoins will be bought using EUR funds from the account at the price the position was opened at.
To settle a short position: Create a Sell Settle Position order. Simply choose the amount you want to settle (up to the total size of your short positions) and select any level of leverage. In the example below, a Sell Settle Position order for 500 ethers is created. 500 ethers from the account will be sold in return for bitcoins at the price the position was opened at.
API trading: Settle Position orders work as described in our API documentation under “Add standard order,” with the order type called as “settle-position”. See the API documentation here: https://www.kraken.com/help/api#private-user-trading
Please note: Position settlement follows the FIFO (“first in first out”) rule - meaning that positions are always settled in the order they are created.