How to calculate the profit and loss of Kraken contracts? What is the difference between unrealized profit and loss and realized profit and loss?

To calculate P&L on Kraken futures, use: P&L = (Exit Price - Entry Price) Contract Size Number of Contracts; track both unrealized and realized P&L for effective trading.

Apr 27, 2025 at 10:00 pm

Trading futures contracts on Kraken can be a lucrative endeavor, but it's crucial to understand how to calculate profit and loss (P&L) to manage your investments effectively. This article will guide you through the process of calculating P&L for Kraken contracts and explain the difference between unrealized P&L and realized P&L.

Understanding Kraken Futures Contracts

Kraken offers futures contracts that allow traders to speculate on the future price of various cryptocurrencies. These contracts are agreements to buy or sell an asset at a future date for a price agreed upon today. When trading futures, it's essential to keep track of your profit and loss to make informed decisions.

Calculating Profit and Loss on Kraken Contracts

To calculate the profit or loss of a Kraken futures contract, you need to consider several factors, including the entry price, exit price, and the number of contracts traded. The basic formula for calculating P&L is:

P&L = (Exit Price - Entry Price) Contract Size Number of Contracts

• Entry Price: The price at which you opened your position.
• Exit Price: The price at which you closed your position.
• Contract Size: The amount of cryptocurrency represented by one contract.
• Number of Contracts: The number of contracts you traded.

For example, if you bought 5 Bitcoin futures contracts at an entry price of $30,000 and sold them at an exit price of $32,000, with each contract representing 1 Bitcoin, your P&L would be calculated as follows:

P&L = (32,000 - 30,000) 1 5 = 2,000 5 = $10,000**

This calculation shows a profit of $10,000. If the exit price were lower than the entry price, the result would be a loss.

Unrealized Profit and Loss

Unrealized P&L, also known as "paper P&L," refers to the profit or loss you would have if you closed your position at the current market price. It is a hypothetical value that changes as the market price fluctuates. To calculate unrealized P&L, you use the same formula as above, but you replace the exit price with the current market price.

For instance, if you are holding the same 5 Bitcoin futures contracts bought at $30,000 and the current market price is $31,000, your unrealized P&L would be:

Unrealized P&L = (31,000 - 30,000) 1 5 = 1,000 5 = $5,000**

This means you would have a $5,000 profit if you were to close your position at the current market price.

Realized Profit and Loss

Realized P&L is the actual profit or loss you experience when you close a position. It is the tangible result of your trading activity and is calculated using the entry and exit prices of your trades. The formula for calculating realized P&L is the same as the one used for overall P&L.

Continuing with the previous example, if you sold your 5 Bitcoin futures contracts at $32,000, your realized P&L would be:

*Realized P&L = (32,000 - 30,000) 1 5 = 2,000 5 = $10,000**

This is the actual profit you made from the trade.

Difference Between Unrealized and Realized P&L

The primary difference between unrealized P&L and realized P&L lies in their nature and impact on your account:

• Unrealized P&L is a theoretical value that reflects the potential profit or loss if you were to close your position at the current market price. It does not affect your account balance until you close the position.
• Realized P&L is the actual profit or loss that results from closing a position. It directly affects your account balance and represents the tangible outcome of your trading decisions.

Understanding this difference is crucial for managing your trading strategy and risk. Unrealized P&L can help you monitor the performance of your open positions, while realized P&L provides a clear picture of your actual financial gains or losses.

Monitoring P&L on Kraken

Kraken provides tools to help you monitor your P&L in real-time. Here are the steps to view your P&L on Kraken:

• Log into your Kraken account.
• Navigate to the 'Futures' section.
• Select the specific futures contract you are interested in.
• Check the 'Open Positions' tab to see the unrealized P&L for your open positions.
• Review the 'Trade History' tab to see the realized P&L for your closed positions.

These steps allow you to keep track of both your unrealized and realized P&L, helping you make informed decisions about when to close or adjust your positions.

FAQs

Q: How often should I check my unrealized P&L on Kraken?

A: It's a good practice to monitor your unrealized P&L regularly, especially if the market is volatile. Checking it daily or even multiple times a day can help you stay on top of your positions and make timely decisions.

Q: Can unrealized P&L turn into realized P&L without any action from me?

A: No, unrealized P&L remains unrealized until you take action to close your position. Only when you close a position does the unrealized P&L become realized P&L.

Q: Is it possible to have a positive unrealized P&L but a negative realized P&L on the same contract?

A: Yes, this can happen if the market price moves in your favor while you hold the position (positive unrealized P&L), but then you close the position at a price that results in a loss (negative realized P&L). It's important to consider both when managing your trades.

Q: How does leverage affect my P&L on Kraken futures contracts?

A: Leverage can amplify both your profits and losses. If you use leverage, your P&L calculations will be based on the notional value of your position, which is the contract size multiplied by the number of contracts and the price. Higher leverage increases the potential for larger P&L swings, so it's essential to manage your risk carefully.