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What does the Profit and Loss Profile of Futures Positions Look like?

poe 02 020 020 01This is what we call a profit and loss graph. The futures price is plotted on the (horizontal) x-axis. On the (vertical) y-axis, the profit associated with each futures price is plotted above the x-axis and the loss below the x-axis.

 

poe 02 020 020 01a 

Purchase price - 135.00
Closeout price + 136.10
Profit + 1.10

poe 02 020 020 01a 

Selling price + 135.00
Closing price - 136.10
Loss - 1.10

In order to display the profit/loss in euro, profits and losses of the examples must now be multiplied by the multiplier set by the exchange relevant to the respective futures contract.

Euro-Bund-Future

Contract size EUR 100,000
Price quotation Percent, with two decimal points
Minimum price movement (known as a "tick"): 0.01%
corresponding to 0.01 * EUR 100,000 = EUR 10

Thus, a profit of 1.10 on a long position in a Euro Bund futures contract corresponds to a profit of 110 ticks at EUR 10 each, or EUR 1,100. The short position on the other hand generates a loss in the amount of EUR 1,100 (110 ticks x EUR 10).

The following two examples, using more than one traded futures contract, serves to illustrate how futures contracts can generate profits or losses: 

The Euro-Bund-Future refers to 8.5-10.5 year government bonds. As act behave, the future itself will behave.

May 17th
fgbl short openingA trader sells ten Euro Bund Futures contracts at a price of 141.20 because he is expecting yields to increase (and therefore prices for long-term Government Bonds to fall).

May 24th fgbl long closingThe yields for long-term German Government Bonds have indeed not increased, they have fallen. And the price of the Euro Bund Futures contract has risen. The trader closes out at 142.00.

Profit/Loss
Selling price 141.20
Closeout price 142.00
Loss - 0,80 = - 80 Ticks
-80 ticks x EUR 10/tick x 10 contracts = - EUR 8,000

The Euro-Bund-Future refers to 8.5-10.5 year government bonds. As act behave, the future itself will behave.

May 7th
fgbl long openingA trader buys five Euro Bund Futures at a price of 142.50, because he is expecting yields to fall (and therefore bond prices for long-term Government Bonds to increase).

Mai 10th
fgbl short closingThe yields for long-term German Government Bonds decreased, exactly the trader's expectations. The price of the Euro Bund Futures contract has risen. The trader closes out at 143.10.

Profit/Loss
Purchase price - 142.50
Closeout price + 143.10
Profit + 0.60 = + 60 ticks
+60 ticks x EUR 10/tick x 5 contracts = + EUR 3,000

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