Worked P&L examples

These examples apply the payoff defined in Specification. All values are in USD and basis points. Skew charges are assumed to be zero, which is the case when a trade does not increase open interest imbalance. See Fees.

Δbps (Long)  = exit_bps − entry_bpsΔbps (Short) = −(exit_bps − entry_bps)P&L          = notional × Δbps / 10,000

Example 1: Long premium held to settlement#

A trader expects Korean demand to strengthen into the weekend and opens a Long premium position on BTC.

Step by step#

Δbps       = 310 − 120 = +190 bpsP&L        = 10,000 × 190 / 10,000 = +190 USDOpen fee   = 0.05% × 10,000 = 5 USDSettle fee = 0.02% × 10,000 = 2 USDNet        = 190 − 5 − 2 = +183 USD

The position returns 183 USD on 2,000 USD of margin, 9.15%. No closing fee is charged because the position was held to settlement.

Example 2: Short premium as a hedge (Kimp Guard)#

A desk holds crypto inventory in Korea that is priced at a premium. If the premium collapses, the inventory loses value relative to global markets even if the global price does not move. The desk opens a Short premium position to offset that risk.

Step by step#

Δbps       = −(50 − 400) = +350 bpsP&L        = 50,000 × 350 / 10,000 = +1,750 USDOpen fee   = 0.05% × 50,000 = 25 USDSettle fee = 0.02% × 50,000 = 10 USDNet        = 1,750 − 25 − 10 = +1,715 USD

The premium fell by 350 bps. On roughly 50,000 USD of premium-priced inventory, that fall costs the desk about 3.5% of the inventory's value relative to global markets, or about 1,750 USD. The short position pays 1,750 USD before fees, so the hedge offsets the premium loss. The residual cost of the hedge is the 35 USD in fees. The hedge is approximate: the inventory's exposure also depends on the exact FX rate and the timing of its eventual sale.

Example 3: Long premium closed early at a loss#

A trader in the open lane opens a Long premium position on SOL and closes it before expiry after the premium falls.

Step by step#

Δbps      = 80 − 200 = −120 bpsP&L       = 9,000 × (−120) / 10,000 = −108 USDOpen fee  = 0.05% × 9,000 = 4.50 USDClose fee = 0.05% × 9,000 = 4.50 USDNet       = −108 − 4.50 − 4.50 = −117 USD

The trader receives 3,000 − 108 − 4.50 = 2,887.50 USD of margin back at close, having paid the 4.50 USD open fee at entry. Total loss is 117 USD, 3.9% of margin.

Negative values#

The same arithmetic applies across zero. A Short premium position opened at +30 bps and settled at −70 bps, a reverse premium (역프), gains −(−70 − 30) = +100 bps. On 10,000 USD notional that is +100 USD before fees.

Summary#

For how losses lead to liquidation, see Liquidation.