How is unrealized profit and loss calculated for Coinbase Futures?

Understanding Unrealized Profit and Loss in Coinbase Futures

Unrealized profit and loss (PnL) represents the current value of open positions in Coinbase Futures before they are closed. This metric fluctuates with market prices and is critical for traders managing risk and evaluating performance. Unlike realized PnL, which is locked in upon position closure, unrealized PnL reflects potential gains or losses based on the latest mark price.

Components Influencing Unrealized PnL Calculation

1. The entry price of the futures contract determines the baseline cost for calculating deviations in value.
2. The current mark price, derived from a fair market valuation across exchanges, is used instead of the last traded price to prevent manipulation.
3. The position size, measured in contracts or base currency units, directly scales the impact of price changes.
4. The direction of the trade—long or short—affects whether rising or falling prices generate unrealized gains.
5. Funding payments, though settled periodically, do not alter unrealized PnL but influence overall account equity.

Calculation Methodology for Long and Short Positions

1. For a long position, unrealized PnL equals (Mark Price – Entry Price) multiplied by the position size.
2. In a short position, the formula reverses: (Entry Price – Mark Price) times position size yields unrealized PnL.
3. Negative results indicate unrealized losses, while positive values reflect unrealized profits.
4. All calculations occur in real time, updating as the mark price changes within the trading session.
5. Coinbase uses a per-contract valuation model, ensuring consistency across different underlying assets like BTC or ETH.

Risk Management and Margin Implications

1. Unrealized losses reduce available margin balance, increasing the likelihood of liquidation if thresholds are breached.
2. Traders must monitor unrealized PnL closely, especially during high volatility, to avoid automatic position closures.
3. Isolated margin accounts allocate fixed collateral to each position, making unrealized PnL directly tied to that segment’s health.
4. Cross-margin models spread risk across all positions, allowing unrealized losses in one trade to be offset by gains in others.
5. The maintenance margin requirement is recalculated dynamically based on current unrealized PnL and prevailing market conditions.

Frequently Asked Questions

1. What is the difference between mark price and last traded price in PnL calculation? Coinbase Futures uses the mark price to compute unrealized PnL to ensure accuracy and resist price manipulation. The last traded price reflects individual transactions, which can be outdated or skewed during low liquidity periods. The mark price aggregates data from multiple sources to represent a fair market value.
2. Does funding rate affect unrealized PnL? Funding payments do not alter unrealized PnL. These periodic transfers between long and short holders are treated as separate cash flows. Unrealized PnL remains focused on price movement relative to entry, while funding impacts account balance independently upon settlement.
3. Can unrealized PnL be positive while my position is close to liquidation? Yes. A position may show unrealized profit in stable conditions but approach liquidation during sudden volatility if the mark price moves sharply against it. Liquidation depends on margin ratio, which includes both unrealized PnL and current collateral levels.
4. How often is unrealized PnL updated on Coinbase Futures? Unrealized PnL updates continuously in real time as the mark price changes. The platform refreshes these values with every tick in the underlying index, ensuring traders have immediate visibility into their open position valuations.