Regardless of any trades, it is important to understand how P&L is calculated before entering one. In sequential order, traders need to understand the following variables in order to accurately calculate their P&L.
1) Average Entry Price of position
2) Unrealized P&L and unrealized P&L% of the position
3) Closed P&L
1) Average Entry Price (AEP) of position
In Bybit, whenever traders add on to their position via new orders, AEP will change.
For example: Trader A holds an existing BTCUSDT open buy position of 0.5 qty with an entry price of USD 5000. After an hour, Trader A decided to increase his buy position by opening an additional 0.3 qty with an entry price of USD 6,000.
Below shows how the formula for AEP and the computation steps:
Average entry price = Total contract value in USDT/Total quantity of contracts
Total contract value in USDT = ( (Quantity1 x Price1) + (Quantity2 x Price2)...)
By using the figures above:
Total contract value in USDT
= ( (Quantity1 x Price1) + (Quantity2 x Price2) )
= ( (0.5 x 5000) + (0.3 x 6000) )
= 4300
Total quantity of contracts
= 0.5 + 0.3
= 0.8 BTC
Average Entry Price
= 4300 / 0.8
= 5375
Once an order is successfully executed, an open position and its real-time unrealized P&L will be shown inside the positions tab.
Depending on which side of the trade you are in, the formula used to calculate the unrealized P&L will differ.
For long position:
For example:
Trader B holds an existing BTCUSDT open buy position of 0.2 qty with an entry price of USD 7000. When the Last Traded Price inside the order book is showing USD 7500, the unrealized P&L shown will be 100 USDT.
Unrealized P&L = Contract Qty x (Last Traded Price - Entry Price)
= 0.2 x (7500 - 7000)
= 100 USDT
For short position
For example: Trader C holds an existing BTCUSDT open sell position of 0.4 qty with an entry price of USD 6000. When the Last Traded Price inside the order book is showing USD 5,000, the unrealized P&L shown will be 400 USDT.
Unrealized P&L = Contract Qty x (Entry Price - Last Traded Price)
= 0.4 x ( 6000 - 5000)
= 400 USDT
Note:
a) In USDT contracts, your P&L is also settled in USDT. This is opposite to inverse contracts where P&L is settled depending on the coin being traded (ex. BTCUSD inverse is settled in BTC).
b) When the price movement is by a certain price (example USD 1000) in the profitable or non-profitable direction, assuming position size of 1 BTC, this means that a trader will gain or lose USD 1000 respectively.
c) Increasing leverage does not directly multiply the profits/losses directly. Instead, profits and losses are determined by the position size and price movement. In short,
- The higher the leverage, the lower the margin collateral needed to open your position
- The larger the contract quantity, the bigger the profits/losses
- The larger the price movement relative to entry price, the bigger the profits/losses
d) The default unrealized P&L is shown based on Last Traded Price. When hovering a mouse cursor on top of the figure, the unrealized P&L will change and show an unrealized P&L based on Mark Price
e) Last but not least, unrealized P&L does not factor in any trading or funding fees which traders may have received/paid out in the process of opening and holding the position.
2A) Unrealized P&L%
Unrealized P&L% basically shows the Return on Investment (ROI) of the position in its percentage form. Similar to Unrealized P&L, the figure shows changes depending on the movement of Last Traded Price. As such, the Unrealized PNL% or ROI formula is below.
Unrealized P&L% = [ Position's unrealized P&L / Position Margin ] x 100%
Position Margin = Initial margin + Fee to close
Using Trader B as an example, Trader B holds an existing BTCUSDT open buy position of 0.2 qty with an entry price of USD 7000. When the Last Traded Price inside the order book is showing USD 7500, the unrealized P&L shown will be 100 USDT. Assuming the leverage used is 10x.
Based on our earlier calculation, the position's unrealized P&L = 100 USDT
Initial margin = (Qty x Entry price) / leverage = (0.2 x 7000) /10 = 140 USDT
Fee to close = Bankruptcy price x Qty x 0.06% = 6300 x 0.2 x 0.06% = 0.756 USDT
Unrealized P&L% = [ 100 USDT / ( 140 USDT + 0.756 USDT ) ] x 100% = 71.05%
Note:
a) Some traders may misunderstood this but adjustments to increase leverage does not increase your unrealized profits. Instead, traders will see an increase in unrealized P&L% due to a reduction in your position margin and not because of an increase in actual profits. Using Trader B as an example again, notice that regardless if leverage is 10x, 5x or 20x, the unrealized P&L remains the same.
- If Trader B uses the same 10x leverage, his unrealized P&L = 100 USDT, unrealized P&L% = 71.05 %
- If Trader B reduces the leverage to 5x, his unrealized P&L = 100 USDT, unrealized P&L% = 35.62%
- If Trader B increases the leverage to 20x his unrealized P&L = 100 USDT, unrealized P&L% = 141.33%
b) For cross margin mode, the position margin will be calculated base on the leverage used for the particular coin.
When traders finally closed their position, the P&L becomes realized and is recorded inside the Closed P&L tab within the Assets page. Unlike unrealized P&L, there are some major differences in the calculation. Below summarizes the differences between the unrealized P&L and closed P&L.
Calculation of Unrealized P&L | Calculation of Closed P&L | |
Position Profit and Loss (P&L) | YES | YES |
Trading Fee(s) | NO | YES |
Funding Fee(s) | NO | YES |
Therefore, assuming full closing of the entire position, the formula for calculating Closed P&L is as follows
Closed P&L = Position P&L - Fee to open - Fee to close - Sum of all funding fees paid/received
Using Trader C as an example, Trader C holds an existing BTCUSDT open sell position of 0.4 qty with an entry price of USD 6000. When the Last Traded Price inside the order book is showing USD 5000, trader C decided to close the entire position via Close by Market function. Assuming that Trader C also opened the position via a market order and funding fees totaling 2.10 USDT was paid out while holding the position.
Based on our earlier calculation, the position's P&L = 400 USDT received
Fee to open = Qty x Entry price x 0.06% = 1.44 USDT paid out
Fee to close = Qty x Exit price x 0.06% = 1.2 USDT paid out
Sum of all funding fees paid/received = 2.10 USDT paid out
Closed P&L = 400 - 1.44 - 1.2 - 2.10 = 395.26 USDT
Note:
a) The above example only applies when the entire position is opened and closed via a single order in both directions.
b) For partial closing of positions, Closed P&L will pro-rate all fees (fee to open and funding fee(s)) according to percentage of position partially closed and use the pro-rated figure to compute the Closed P&L