2023-12-23 09:15:22For traders, it’s important to know how to calculate profit and loss before placing an order. Here’s a guide to help you better understand the relationship between different variables and profit & loss calculations.
When traders place new orders for the existing Options contract, the entry price will change accordingly.
Formula
Position Average Price = [(Last Position Quantity × Last Position Average Price) + (Traded Quantity × Traded Price)/(Last Position Quantity + Traded Quantity)]
Example
Ann holds a 0.1 BTC BTC-31DEC21-48000-C, with an entry price of $3,500. She believes that the price of BTC will continue to rise in the near future. Ann decides to increase her call options, and opens a new call option of 0.1 BTC at the entry price of $4,000.
Average Entry Price = [(0.1 × 3,500) + (0.1 × 4,000)/(0.1 + 0.1)] = $3,750
Unrealized P&L (UPL) is the current profit or loss of open positions. Based on the direction of your position — long or short — the formula used to calculate the unrealized profit and loss will be different.
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Buy Option |
Sell Option | |
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Description |
For traders who believe that the underlying asset’s price will rise in the future, they can choose to buy call or sell put options. |
For traders who think that the underlying asset’s price will drop in the future, they can choose to buy put or sell call options. |
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Formula |
UPL = (Mark Price − Average Entry Price) × Position Quantity |
UPL = (Average Entry Price − Mark Price) × Position Quantity |
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Example |
Ann buys a 0.1 BTC BTC-31DEC21-48000-C, with an entry price of $3,500. The price of BTC rises, and when the Mark price reaches $4,500, the unrealized P&L of the option she holds is [(4,500 − 3,500) × 0.1] = 100 USDC. |
Bob sells a 0.3 BTC BTC-31DEC21-50000-C with an average entry price of $2,600. The price of BTC rises, and when the mark price reaches $2,800, the unrealized P&L of the option he holds is [(2,600 − 2,800) × 0.3] = −60 USDC. |
Note: All Options contracts are settled in USDC.
ROI shows the percentage return on investment for each position.
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Buy Option |
Sell Option | |
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Formula (Cross Margin Mode) |
（Mark Price - Average Entry Price）/ Average Entry Price |
（Average Entry Price - Mark Price）/ Average Entry Price |
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Examples under Cross Margin Mode |
Sally buys a 0.1 BTC BTC-23NOV23-36000-C, with an entry price of $4,700. The price of BTC rises, and when the Mark price reaches $4,900, the unrealized P&L of the option she holds is [(4,900 − 4,700) × 0.1] = 20 USDC. ROI = 20 / 4700 = 0.43% |
Bob sells a 0.1 BTC BTC-23NOV23-36000-P, with an entry price of $4,700. The price of BTC rises, and when the Mark price reaches $4,900, the unrealized P&L of the option she holds is [(4,700 - 4,900) × 0.1] = -20 USDC. ROI = -20 / 4700 = -0.43% |
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Formula (Portfolio Margin Mode) |
The calculation of options' ROI within the portfolio margin takes into account the underlying asset as a whole. ROI = Unrealized P&L of Derivatives on Underlying Assets/Initial Margin of Underlying Assets | |
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Delivery ROI |
(Delivery Cash Flow - Average Entry Price * Quantity - Fee to Open - Delivery Fee) / (Average Entry Price * Quantity) |
(Delivery Cash Flow + Average Entry Price * Quantity - Fee to Open - Delivery Fee) / (Average Entry Price * Quantity) |
Closed P&L is the profit and loss that occurs when the trader closes the position.
Formula
Closed P&L for Buy Call/ Put = (Traded Price − Position Average Price) × Traded Quantity − Trading Fees (open and closed position)
Closed P&L for Sell Call/ Put = (Position Average Price − Traded Price) × Traded Quantity − Trading Fees (open and closed position)
Example
Sell Call: The BTC index price is $44,900. Bob sells a 0.3 BTC BTC-31DEC21-50000-C, with an average entry price of $2,600. When the price of BTC drops to $44,000, he closes the position early at a mark price of $2,400.
The Closed P&L of the option is 52 USDC, based on the following calculation:
[(2,600 − 2,400) × 0.3] − 44,900 × 0.3 × 0.03% − 44,000 × 0.3 × 0.03%.
This is generated when the Option expires.
Formula
Delivered RPL for Call Option = Maximum (Delivery Price − Strike Price, 0) × Position Quantity + Premium (receive or pay) − Delivery Fee − Trading Fee (open position)
Delivered RPL for Put Option = Maximum (Strike Price − Delivery Price, 0) × Position Quantity + Premium (receive or pay) − Delivery Fee − Trading Fee (open position)
Example
Buy Call:
The BTC index price is $44,900. Ann buys a 0.1 BTC BTC-31DEC21-48000-C, with an entry price of $3,500. When the contract expires, the BTC delivery price is $52,000. It’s traded at a strike price of $48,000. The delivery P&L of the option is 47.873 USDC, based on the following calculation:
Maximum (52,000 − 48,000, 0) × 0.1 − 3,500 × 0.1 − 44,900 × 0.1 × 0.03% − 52,000 × 0.1 × 0.015%
Let’s revisit Ann’s case, in which the BTC index price is $44,900. Ann holds a 0.1 BTC BTC-31DEC21-48000-C, with an entry price of $3,500. The delivery P&L of the option is 400 USDC.
- Trading Fee = Minimum (0.03% × 44,900, 12.5% × 3,500) × 0.1 = 1.347 USDC
Note: Trading fee for a single contract can never be higher than 12.5% of the option price.
Let’s suppose that the estimated delivery price is $49,000 when the contract is about to expire.
- Delivery Fee = Minimum [(0.015% × 49,000, 12.5% × (49,000 − 48,000)] × 0.1= 0.735 USDC
As an option buyer, Ann needs to pay a premium to the seller to obtain the right to the call option.
Formula:
Premium = Traded Quantity × Traded Price
- 0.1 × 3,500 = 350 USDC
Delivery P&L = 400 − 1.347 − 0.735 − 350 = 47.918 USDC
Closed P&L and Delivery P&L are different from Unrealized P&L and Realized P&L. It’s worth noting that Delivery P&L also takes premium into account. Please refer to the following table for details:
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Unrealized P&L |
Closed P&L Realized P&L |
Delivery P&L |
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Position P&L |
YES |
YES |
YES |
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Trading Fees |
NO |
YES |
YES |
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Delivery Fee |
NO |
NO |
YES |
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Premium |
NO |
NO |
YES |
Realized P&L is the profit and loss that occurs when the trader closes the position early. Please note that the Realized P&L in the position zone represents the total profit and loss of the position since the position has been held.
Formula
Realized P&L = Sum (Profit and loss on closed positions) − Trading Fees (open and closed positions)
Example
Let's see how the Realized P&L displayed in the position zone changes in different scenarios.
Scenario 1: Bob buys 0.4 BTC BTC-31DEC21-50000-C when the Option mark price is $2,400 and the BTC index price is $44,000.
Trading Fee (open position) = 44,000 × 0.4 × 0.03% = 5.28 USDC
In this case, the Realized P&L of Bob's position is −5.28 USDC.
Scenario 2: The BTC index price rises to $44,900. Bob sells a 0.3 BTC BTC-31DEC21-50000-C, with an average entry price of $2,400. He closes the position at a mark price of $2,600.
Realized P&L (before) = - 5.28 USDC
Trading Fee (closed position) = 44,900 × 0.3 × 0.03% = 4.041 USDC
Realized P&L = [(2,600 − 2,400) × 0.3] − 44,900 × 0.3 × 0.03% - 5.28 = 50.68 USDC
Scenario 3: Now Bob only holds 0.1 BTC BTC-31DEC21-50000-C. Then, when the BTC index price is $45,000, he buys 0.2 BTC BTC-31DEC21-50000-C at $2,500.
Realized P&L (before) = 50.68 USDC
Trading Fee (open position) = 45,000 × 0.2 × 0.03% = 2.7 USDC
Realized P&L (before) = 50.68 − 2.7 = 47.98 USDC
For more detailed information about option fees, please refer to Bybit Option Fees Explained.
Yes
No