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

This 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.

 Purchase price - 135.00 Closeout price + 136.10 Profit + 1.10

 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
A 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 The 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
A 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
The 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