> ## Documentation Index
> Fetch the complete documentation index at: https://docs-polymarket-us.mintlify.site/llms.txt
> Use this file to discover all available pages before exploring further.

# Collateral

> Learn how Polymarket US supports fully-collateralized contracts and guarantees payouts

Polymarket US operates with **fully-collateralized contracts**, meaning sufficient funds are locked to cover the maximum possible payout at the time the trade is executed. No additional funds are required afterward.

## How Collateral Works

When a trade executes at a given price:

**Buyers (Long Positions)**

* Pay the contract price
* No additional margin required
* Maximum loss: amount paid
* Maximum gain: \$1.00 – price paid

**Sellers (Short Positions)**

* Receive the contract price as proceeds
* Post \$1.00 margin per contract (full payout value)
* Fiat balance increases by sale proceeds
* Buying power decreases by (Payout Value – Sale Price)
* Maximum loss: \$1.00 – sale price
* Maximum gain: sale price

**Example: Trade at \$0.40**

| Participant | Cash Flow | Margin Required | Buying Power Change |
| ----------- | --------- | --------------- | ------------------- |
| Buyer       | –\$0.40   | \$0             | –\$0.40             |
| Seller      | +\$0.40   | \$1.00          | –\$0.60             |

At settlement, **Polymarket Clearing** holds the seller's \$1.00 margin to guarantee payout. The buyer's \$0.40 payment becomes the seller's proceeds.

## Maximum Gain and Loss

Once a trade is executed, maximum gain and loss are fixed and do not change regardless of subsequent price movements.

**For a contract trading at \$0.40:**

| Position     | Max Loss | Max Gain |
| ------------ | -------- | -------- |
| Buy (Long)   | \$0.40   | \$0.60   |
| Sell (Short) | \$0.60   | \$0.40   |

## Settlement and Payout

At settlement, **Polymarket Clearing** releases funds automatically:

* Winners receive **\$1.00 per contract**
* Losers receive **\$0**
* No margin calls, reconciliations, or additional obligations

**Settlement Example: Seller at \$0.40**

If the seller wins (event does not occur):

* Seller keeps: \$0.40 proceeds
* Margin released: \$1.00
* Total return: \$1.40
* Net profit: \$0.40

If the buyer wins (event occurs):

* Seller's \$1.00 margin → paid to buyer
* Seller keeps: \$0.40 proceeds
* Net loss: \$0.60

## Key Points

* Buyers post the purchase price; sellers post \$1.00 margin per contract.
* Maximum gain and loss are **fixed at the time of the trade**.
* Sellers receive sale proceeds but must post full payout value as margin.
* **Polymarket Clearing guarantees payout** from the seller's locked margin.
* There are no negative balances or margin calls.