How futures PnL is calculated
A futures position has two sizes and confusing them is the most common mistake in leveraged trading. The margin is what you posted. The notional is what you control. Profit and loss are calculated on the notional; your return is measured against the margin.
units = notional ÷ entry price
gross = units × (exit − entry) (reverse for a short)
PnL = gross − entry fee − exit fee
ROE = PnL ÷ margin × 100
A worked example
$1,000 of margin at 10x, long from $42,000, closed at $45,000, 0.05% fee per side:
| Notional size | $10,000.00 |
|---|---|
| Gross profit | $714.29 |
| Fees both sides | $10.36 |
| Net profit | $703.93 |
| Return on margin | +70.39% |
A 7.1% move in the market turned into a 70% return on the margin. The same 7.1% in the other direction would have removed 70% of it, and a 10% move would have removed all of it.
Why ROE flatters leveraged trading
Return on equity looks spectacular because the denominator is small. It is a real number, but it measures the wrong thing if the margin is only a slice of your account. A position that returns 70% on $1,000 of margin has returned 7% of a $10,000 account — which is the figure that actually matters.
Judging leveraged trades by ROE is how people talk themselves into sizes that a single ordinary candle can erase. Measure against the whole account, always.
The costs that do not appear in the price
- Fees on notional. At 20x, a 0.05% taker fee per side costs 2% of your margin per round trip. Ten round trips is a fifth of the margin gone.
- Funding rate. Perpetuals charge or pay every eight hours depending on which side is crowded. A long held through a bullish week can pay several percent in funding alone.
- Slippage. Market orders on a large notional walk the book. The fill you get is not the price you saw.
Before opening the position, check where it would be closed for you with the liquidation calculator, and size it deliberately with the position size calculator.
Common questions
How do you calculate PnL on futures?
Multiply the number of units in the position by the difference between exit and entry price, then subtract the fees charged on both sides of the notional value. Reverse the sign for a short.
What is ROE in futures trading?
Return on equity — profit divided by the margin you posted. It is much larger than the price move because the margin is only a fraction of the position.
Are futures fees charged on margin or notional?
On notional. This catches people out at high leverage, where a small percentage fee on the full position size is a large percentage of the margin.
What is the funding rate?
A periodic payment between longs and shorts on perpetual contracts that keeps the contract price close to spot. If your side is crowded you pay it, typically every eight hours.
Does this include funding payments?
No. It covers entry and exit fees. Funding depends on the rate at each interval and how long you hold, so add it separately for positions held over days.