![payoff vs profit diagram payoff vs profit diagram](https://image3.slideserve.com/6809946/payoff-profit-diagram-of-call-option-holder-at-expiration-l.jpg)
This calculation gives you profit or loss per contact, then you need to multiply this number by the number of contracts you own to get the total profit or loss for your position.Ī trader buys one WTI contract at $53.60. The dollar value of a one-tick move in WTI is $0.01 x 1000 = $10 Calculation ExampleĬalculating profit and loss on a trade is done by multiplying the dollar value of a one-tick move by the number of ticks the futures contract has moved since you purchased the contract.
![payoff vs profit diagram payoff vs profit diagram](https://financetrain.sgp1.cdn.digitaloceanspaces.com/2010/10/put_payoff.gif)
The dollar value of a one-tick move is calculated by multiplying the tick size by the size of the contract. In this example, the current value would be $54 x 1000 = $54,000. If the current price of WTI futures is $54, the current value of the contract is determined by multiplying the current price of a barrel of oil by the size of the contract.
![payoff vs profit diagram payoff vs profit diagram](https://cdn.corporatefinanceinstitute.com/assets/payoff-graph-vs-pl-diagram3.png)
The price of a WTI futures contract is quoted in dollars per barrel. WTI Crude Oil futures, for example, represents the expected value of 1,000 barrels of oil. To determine the profit and loss for each contract, you will need to be aware of the contract size, tick size, current trading price, and what you bought or sold the contract for. Each market calculates movement of price and size differently, and as such, traders need to be aware of how the market you are trading calculates profit and loss. Market participants trade in the futures market to make a profit or hedge against losses.