How to Manually Calculate Profit and Loss on a Futures Contract?

Understanding Futures Contract Settlement Mechanics

1. A futures contract obligates the buyer to purchase—and the seller to deliver—a specific quantity of an underlying asset at a predetermined price on a set future date.

2. Most crypto futures positions are cash-settled, meaning no physical delivery occurs; instead, the difference between entry and exit prices is paid in stablecoin or native token.

3. Contracts are quoted in terms of the base asset per unit of quote currency—for example, BTC/USDT means each contract represents one BTC priced in USDT.

4. Tick size defines the smallest price increment movement; for BTC perpetual swaps on Binance, it is $0.5, directly impacting PnL granularity.

5. Leverage amplifies both gains and losses proportionally—opening a 10x leveraged position multiplies unrealized PnL by ten relative to the margin posted.

Identifying Key Input Variables

1. Entry price is the executed fill price when opening the position—this serves as the baseline for all subsequent PnL computation.

2. Exit price refers to the execution price upon closing the trade, whether via market order, limit order, or liquidation trigger.

3. Contract multiplier specifies how much notional value one contract controls—e.g., Bybit’s BTCUSD contracts use $1 multiplier, meaning each 1-point move equals $1 change in PnL.

4. Position size indicates the number of contracts held—not to be confused with position value, which equals size × multiplier × price.

5. Funding payments must be accounted for in perpetual contracts; they accrue every 8 hours and shift PnL based on the funding rate sign and position direction.

Computing Realized Profit or Loss

1. For a long position: PnL = (Exit Price − Entry Price) × Contract Multiplier × Number of Contracts.

2. For a short position: PnL = (Entry Price − Exit Price) × Contract Multiplier × Number of Contracts.

3. If trading on BitMEX XBTUSD, where multiplier is $1 and position size is 5 contracts, entering long at $62,400 and exiting at $63,150 yields: (63150 − 62400) × 1 × 5 = $3,750.

4. Fees reduce net PnL—taker fees on most platforms range from 0.02% to 0.06% of notional value, applied at both entry and exit.

5. When multiple fills occur, average entry price must be weighted by volume—e.g., buying 2 contracts at $61,800 and 3 at $62,100 gives weighted entry of ($61,800×2 + $62,100×3)/5 = $62,040.

Handling Unrealized PnL and Mark Price Adjustments

1. Unrealized PnL updates continuously using mark price—not last traded price—to prevent manipulation during low liquidity.

2. Mark price typically combines index price and decaying impact of order book depth; on OKX, it uses a blended index across eight spot exchanges.

3. The formula for unrealized PnL remains identical to realized, but substitutes mark price for exit price—critical for margin monitoring.

4. Negative unrealized PnL reduces available margin; if equity falls below maintenance margin level, partial or full liquidation follows.

5. Auto-deleveraging may activate when insolvent positions cannot be closed cleanly—profitable counterparties absorb residual risk based on leverage tier priority.

Frequently Asked Questions

Q: Does PnL calculation differ between inverse and linear futures?A: Yes. Inverse contracts settle in the base asset (e.g., BTC), so PnL is denominated in BTC and converted to USD at exit. Linear contracts settle in quote currency (e.g., USDT), making PnL calculations directly arithmetic in stablecoin terms.

Q: How does funding affect cumulative PnL over multi-day holds?A: Funding payments compound daily—if holding a long during positive funding periods, each 8-hour interval deducts from equity; negative funding adds to it. Total funding impact equals sum of all settled funding transfers.

Q: Is slippage included in manual PnL formulas?A: No. Manual calculation assumes perfect execution at specified prices. Actual PnL must subtract slippage cost—the difference between intended and filled price—especially relevant during high volatility or thin order books.

Q: Why does my exchange display different PnL than my spreadsheet result?A: Discrepancies often stem from unaccounted funding, fee tiers, mark price divergence, or incorrect contract multiplier assumptions. Always verify instrument specifications on the exchange’s API docs or contract details page.