Profit & Loss

To make or lose money when trading futures:

• Making Money:

  1. Long Position: Buy a futures contract expecting the price to rise. Sell when the price increases to realize a profit.

  2. Short Position: Sell a futures contract expecting the price to fall. Buy back at a lower price to profit from the difference.

• Losing Money:

  1. Long Position: If the price falls after purchasing, selling at a lower price results in a loss.

  2. Short Position: If the price rises after selling, buying back at a higher price incurs a loss.

  Profit or loss is determined by the difference between the entry and exit prices of the futures contracts.

Realized vs. Unrealized Profit & Loss

Realized Profit & Loss:

• Occurs when a trade is completed.

• The profit or loss is locked in when the position is closed.

• Reflects actual gains or losses that affect one's account balance.

Unrealized Profit & Loss:

• Represents potential gains or losses on open positions.

• Changes with market price fluctuations.

• Not locked in until the position is closed.