Average Entry Price of Position
For 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 and loss calculations.
Average Entry Price of Position
When traders place a new position, the entry price will change accordingly.
Formula
Position Average Price = ABS (Last Position Quantity) × Last Position Average Price + Trade Quantity × Trade Price)/(ABS (Last Position Quantity) + Trade 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.
Position Average Price = (0.1 × 3,500 + 0.1 × 4,000)/(0.1 + 0.1) = $3,750
Unrealized P&L
Unrealized P&L 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.
Buy call or sell put to hold long positions
For traders who believe that the underlying asset will rise in the future, they can choose to buy call or sell put options.
Formula
Session UPL = (Mark Price − Session Average Price ) × Traded Quantity
Example
Ann holds 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 100 USDC, or [(4,500 − 3,500) × 0.1].
Buy put or sell call to hold short positions
For traders who think that the underlying asset will drop in the future, they can choose to buy put or sell call options.
Formula
Session UPL = (Session Average Price − Mark Price) × Traded Quantity
Example
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 −60 USDC, or [(2,600 − 2,800) × 0.3].
Notes:
— All options contracts are settled in USDC.
— Once the settlement timing is reached, the average session price will be updated to the mark price at the time of settlement. The settlement times are UTC 08:00, 16:00 and 12AM(midnight).
Realized P&L
Realized P&L is the profit and loss that occurs when the trader closes the position early, or when the option expires. Let's take a look at the following two examples.
Scenario 1: When the option expires
Formula
Delivered RPL for Call Option = Maximum (Delivery Price − Strike Price, 0) × Position Quantity
Delivered RPL for Put Option = Maximum (Strike Price − Delivery Price, 0) × Position Quantity
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 realized P&L of the option is 400 USDC, based on the following calculation:
Maximum (52,000 − 48,000, 0) × 0.1
Scenario 2: Trade
Formula
Trade RPL for Buy Call/Sell Put = (Trade Price − Session Avgerage Price) × Traded Quantity
Trade RPL for Buy Put/Sell Call = (Session Average Price − Trade Price) × Traded Quantity
Example
Sell Call:
Bob sells a 0.3 BTC BTC-31DEC21-50000-C, with an average entry price of $2,600. When the price of BTC drops, he closes the position early at a mark price of $2,400. The realized P&L of the option is
60 USDC, or [(2,600 − 2,400) × 0.3].
For more detailed information about option fees, please refer to Bybit Option Fees Explained.