Profit & Loss
To make or lose money when trading futures:
Making Money:
Long Position: Buy a futures contract expecting the price to rise. Sell when the price increases to realize a profit.
Short Position: Sell a futures contract expecting the price to fall. Buy back at a lower price to profit from the difference.
Losing Money:
Long Position: If the price falls after purchasing, selling at a lower price results in a loss.
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.
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