realized/unrealized PnL with multiplier
realized/unrealized PnL with multiplier
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nimo23 · External communityPost link
External question — Quantitative Finance Stack Exchange
Author: nimo23
Original post: https://quant.stackexchange.com/questions/53518
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
Adaptation: HTML converted to plain text; contact email addresses removed.
Look at this trade:
Sequence Side Quantity @ Price
1. Buy 1000 @ 1000
2. Sell 1000 @ 1250
The calculation of the realized PnL:
version 1:
realizedPnL = (1000-1250)*1000 = 25000$
But looking at other PnL-formulas, for example:
https://www.bitmex.com/app/pnlGuide
https://support.bitforex.com/hc/en-us/articles/360029616532-How-to-calculate-the-unrealized-and-realized-profits-and-loss-PNL-
they use:
version 2:
realizedPnL = (1/1000-1/1250)*1000 = 0,2$
by the formula:
Realized PNL = quantity * multiplier * (1 / Entry Price - 1 / Exit Price)
or
I do not understand the "1/x"-part and the "multiplier"-part
:
When and why should I take version 2 instead of version 1?
Which version is correct?
Has the "1/x" something to do with leverage? Or has the "multiplier" something to do with leverage? For example, if I trade Forex or CFD with a "leverage=1", then "contract multiplier=1". Or do I mix something up?
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nimo23 · External communityPost link
External answer — Quantitative Finance Stack Exchange
Author: nimo23
Original post: https://quant.stackexchange.com/a/53519
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
Adaptation: HTML converted to plain text; contact email addresses removed.
There is no need to use the following confusing formula:
PNL = quantity * multiplier * (1 / Entry Price - 1 / Exit Price)
For
all asset classes
the following formula is sufficient:
PNL = quantity * (ExitPrice - EntryPrice)
The "multiplier" is only used when converting from one bucket (e.g. currency) to another. Looking at the following example:
Sequence Side Quantity @ Price in $
1. Buy 1 BTC @ 10000
2. Sell 1 BTC @ 11000
We have
PnL = (11000-10000)*1 = +1000$ (profit)
in percentage:
PnL = (11000/10000) = +0,1% (profit)
If I want to express the PnL in BTC instead of $, then I can do the following:
PnL = 1/1+0,1 = +0,909BTC
The "
1/x
" is fixed and
independent of any multiplier
. 1 represents 100%. That
`
s all.
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Quoted from Forex.com.bd-Editorial External question — Quantitative Finance Stack Exchange Author: nimo23 Source score (net votes, not local likes): 0 Original post: https://quant.stackexchange.com/questions/53518 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Look at this trade: Sequence Side Quantity @ Price 1. Buy 1000 @ 1000 2. Sell 1000 @ 1250 The calculation of the realized PnL: version 1: realizedPnL = (1000-1250)*1000 = 25000$ But looking at other PnL-formulas, for example: https://www.bitmex.com/app/pnlGuide https://support.bitforex.com/hc/en-us/articles/360029616532-How-to-calculate-the-unrealized-and-realized-profits-and-loss-PNL- they use: version 2: realizedPnL = (1/1000-1/1250)*1000 = 0,2$ by the formula: Realized PNL = quantity * multiplier * (1 / Entry Price - 1 / Exit Price) or I do not understand the "1/x"-part and the "multiplier"-part : When and why should I take version 2 instead of version 1? Which version is correct? Has the "1/x" something to do with leverage? Or has the "multiplier" something to do with leverage? For example, if I trade Forex or CFD with a "leverage=1", then "contract multiplier=1". Or do I mix something up?
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