To liquidate means to sell all of a company's assets, pay its outstanding debts, and distribute the remainder to shareholders, and then go out of business.
In the financial markets, to liquidate refers to a broker selling his or her customer's securities after the customer has failed to meet a margin call.
It can also mean to convert assets into cash.
In futures trading, when a trader exits or offsets a long position, they are liquidating a long position. Similarly, when a trader exits a short position, they are covering shorts, though this is also considered liquidation. When an entire account's positions are to be offset, the positions are said to be liquidated.
In a futures account, the bottom line value of all cash, open futures positions and long and short options positions, marked to the market, is referred to as the liquidation value of the account.
ALSO SEE: Bankruptcy