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How do you Calculate the Daily Offsetting of Profits and Losses?

POE02020040

All profits made, and all losses incurred, from the point in time the futures contract was bought or sold during the trading day - until the end of trading - are immediately settled in cash.

If a future is hold longer than one day, the so-called settlement prices are compared from one-day end to the next day end in order to determine the profits and losses. Eurex Exchange determines the settlement prices at the end of the day or a set time period (close of trading) for the specific product. This way, losses cannot accumulate. And futures contracts are always valued on the basis of the latest prices.

The Initial Margin covers any additional potential losses until the next day. Eurex estimates the possible margin interval on the basis of historical fluctuations in the underlying instrument.

 

Market participants Buyer (Bank A) Price Seller (Bank B)
At position entry Initial Margin
EUR 4,000
135.20 Initial Margin
EUR 4,000
End of trading day 1 +0.30 (30 ticks) =
+ EUR 300
credit
135.50 -0.30 (-30 ticks) =
- EUR 300
margin call
End of trading day 2 +0.22 (22 ticks) =
+ EUR 220
credit
135.72 -0.22 (-22 ticks) =
- EUR 220
margin call
End of trading day 3 -0.28 (-28 ticks) =
- EUR 280
margin call
135.44 +0.28 (28 ticks) =
+ EUR 280
credit
End of trading day 4 -0.34 (-34 ticks) =
- EUR 340 / EUR 100
margin call
115.10 +0.34 (34 ticks) =
+ EUR 340
credit
Result Loss: EUR 100   Profit: EUR 100

 

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