Calculation of Expiry Futures Contracts' Profit and Loss

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Understanding how profit and loss (PnL) is calculated in expiry futures contracts is essential for traders navigating the fast-paced world of digital asset derivatives. Whether you're trading coin-margined or U-stablecoin-margined futures, accurate PnL calculations help manage risk, assess performance, and make informed trading decisions. This guide breaks down the core formulas, explains key terms, and provides real-world examples to clarify how PnL is tracked—from entry to settlement.

Key Concepts in Futures Trading

Before diving into PnL calculations, it’s important to understand several foundational terms used across futures trading platforms.

Size

The size refers to the number of contracts held in a position. In One-way mode, long positions are represented with positive values and short positions with negative values. In Hedge mode, both long and short positions are treated as positive quantities, allowing independent management of directional exposure.

Entry Price

Your entry price is the average price at which your position was opened. Adding to an existing position or opening a reverse position will update this value. For coin-margined and U-stablecoin-margined contracts, the calculation differs slightly due to settlement mechanics.

👉 Learn how to calculate your true entry price in live markets.

How Entry Price Is Calculated

U-Stablecoin-Margined Contracts

For contracts settled in stablecoins like USDT:

Entry Price = (Current Size × Entry Price + Added Size × Added Size's Entry Price) / (Current Size + Added Size)

Example:
You hold a long BTC-USDT futures position of 10 contracts at an entry price of $100,000. You add 5 more contracts at $160,000.

= (10 × 100,000 + 5 × 160,000) / (10 + 5)  
= (1,000,000 + 800,000) / 15  
= $120,000

Your new average entry price becomes $120,000.

Coin-Margined Contracts

For contracts settled in cryptocurrency (e.g., BTC-USD):

Entry Price = (Current Size + Added Size) / (Current Size / Entry Price + Added Size / Added Size's Entry Price)

Example:
You have a short BTC-USD position of 10 contracts at $100,000. You add 5 more contracts at $80,000.

= (10 + 5) / (10 / 100,000 + 5 / 80,000)  
= 15 / (0.0001 + 0.0000625)  
= 15 / 0.0001625 ≈ $92,307

Your updated entry price is approximately $92,307.

Floating PnL: Measuring Unrealized Gains or Losses

Floating PnL reflects the current unrealized profit or loss based on the difference between your entry price and the current mark price—a fair value estimate designed to prevent manipulation.

U-Stablecoin-Margined Contracts

Example:
Long 10 BTC-USDT contracts (face value: 0.01 BTC, multiplier: 1), entry at $100,000, mark price at $160,000.

= 0.01 × 10 × 1 × (160,000 – 100,000) = 6,000 USDT

You have an unrealized gain of 6,000 USDT.

Coin-Margined Contracts

Due to inverse pricing (quoted in USD but settled in BTC), the formula uses reciprocal pricing:

Example:
Short 1,000 BTC-USD contracts (face value: $100), entry at $100,000, mark price at $80,000.

= 100 × 1,000 × 1 × (1/80,000 – 1/100,000)  
= 100,000 × (0.0000125 – 0.00001) = 100,000 × 0.0000025 = 0.25 BTC

You have an unrealized profit of 0.25 BTC.

Floating PnL Ratio: Assessing Return on Margin

This metric shows your unrealized return relative to the margin allocated to the position.

Floating PnL Ratio = (Floating PnL / Position Margin) × 100%

Example:
Unrealized PnL: $6,000 | Margin: $1,600

= (6,000 / 1,600) × 100% = 375%

A ratio above 100% indicates strong profitability relative to capital at risk.

Closed PnL: Realized Profits and Losses

When a position is partially or fully closed, Closed PnL captures the actual profit or loss based on the close price, not the mark price.

Formulas mirror Floating PnL but substitute Close Price for Mark Price.

👉 See how closing strategies impact your realized returns.

Settlement PnL: Final Adjustment at Contract Expiry

At expiry, open positions are settled at the settlement price, triggering Settlement PnL—the final profit or loss calculated using the same structure as Closed PnL but with the settlement price.

This ensures all outstanding positions are resolved fairly based on a pre-defined index or auction price.

Realized PnL: Total Net Gain or Loss

Realized PnL combines all sources of closed and settled gains or losses:

Realized PnL = Closed PnL + Settlement PnL – Trading Fees

Trading fees reduce net profits and must be accounted for when evaluating performance.

The Realized PnL Ratio helps assess efficiency:

Realized PnL Ratio = (Realized PnL / Closed Position's Margin) × 100%

Frequently Asked Questions

How is entry price updated when adding to a position?

The entry price is recalculated as a weighted average. For U-margined contracts, it's a simple volume-weighted average. For coin-margined contracts, due to inverse pricing, it's a harmonic mean based on contract value.

What’s the difference between Floating PnL and Realized PnL?

Floating PnL is unrealized and changes with market prices. Realized PnL is locked in after closing or settling a position and includes fees.

Why do coin-margined contracts use reciprocal pricing?

Because they are settled in cryptocurrency but priced in USD. Using 1/Price converts USD exposure into BTC-denominated gains or losses.

Does leverage affect PnL calculations?

Leverage amplifies both gains and losses by reducing required margin. While it doesn’t change the PnL formula directly, it increases the PnL ratio significantly.

How is the mark price determined?

The mark price is derived from external indices and funding rates to reflect fair market value and prevent liquidation due to short-term price spikes.

Are fees included in Realized PnL?

Yes. Trading fees are subtracted from Closed PnL and Settlement PnL to determine net Realized PnL.

Core Keywords

Digital asset trading involves substantial risk, including the potential loss of principal. Leverage can magnify both gains and losses. This content is for informational purposes only and does not constitute financial advice. Always conduct your own research and consider your risk tolerance before trading.

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