How to calculate Upbit contract returns

Understanding Upbit Contract Returns

Calculating returns on Upbit contracts involves a systematic approach to assess the profitability of your trades. Here's a comprehensive guide to help you navigate the process:

Step 1: Determine the Contract Value

• Identify the current underlying asset price (e.g., BTC, ETH) on Upbit.
• Multiply the asset price by the contract size (e.g., 1 BTC for BTC contracts).
• The resulting value represents the contract value, which serves as the base for calculating returns.

Step 2: Account for Initial Margin and Fees

• Deduce the initial margin (a percentage of the contract value) from the contract value. This margin secures your position against market fluctuations.
• Consider the trading fees associated with opening and closing the contract, as these impact the realized returns.

Step 3: Monitor Market Price Movements

• Track the price movements of the underlying asset throughout the contract's duration.
• Determine the entry and exit prices for your trade, which define the price difference you aim to profit from.

Step 4: Calculate Unleveraged Profit or Loss

• For unleveraged trades, calculate your profit or loss by subtracting the entry price from the exit price and multiplying the result by the contract size.
• If the result is positive, you've made a profit; if it's negative, you've incurred a loss.

Step 5: Incorporate Leverage

• Leveraged contracts magnify both potential profits and losses.
• Calculate the leverage multiplier to understand how much capital is borrowed for the trade.
• Multiply the unleveraged profit or loss by the leverage multiplier to determine the leveraged return.

Step 6: Consider Time Value for Futures Contracts

• Futures contracts have an expiration date, which affects their value over time.
• Calculate the time value premium (or basis) as the difference between the futures price and the underlying asset price.
• Time value erosion occurs as the contract approaches expiration, impacting returns.

Step 7: Subtract Funding Rates and Fees

• Funding rates are periodic payments between long and short positions.
• Account for funding rates and any additional fees incurred during the contract's duration to adjust the final return calculation.

Additional Considerations:

• Utilize Upbit's trading tools and calculators to simplify the return calculation process.
• Understand the risks associated with contract trading and implement appropriate risk management strategies.
• Regularly monitor market conditions and adjust your trading strategy accordingly.