## Calculating Futures Contract Profit or Loss

market participants trade in the futures

market to make a profit or hedge against

losses each market calculates movement

of price and size differently as a

trader you will want to be aware of how

the market your trading calculates

profit and loss to determine the profit

and loss for each contract you will need

to be aware of the contract size the

tick size the current price being traded

and what you've bought or sold the

contract for let's look at the WTI crude

oil futures contract this contract

represents the expected value of 1,000

barrels of oil the price of a WTI

futures contract is quoted in dollars

per barrel the minimum tech size is 1

cent the dollar value of a one tick move

is calculated by multiplying the tick

size by the size of the contract for

example the dollar value of a one tick

move in WTI is 1 cent times 1,000

barrels of oil which equals 10 dollars

calculating profit and loss on a trade

is done by multiplying the dollar value

of a 1 tick move by the number of ticks

the futures contract has moved since you

purchased the contract this calculation

gives you profit or loss per contract

you need to multiply this number by the

number of contracts you own to get the

total profit or loss for your position

for example a trader buys 1 WTI contract

at 50 360 if the price of WTI increases

to \$54 the price move would then be \$54

minus 50 360 which would be 40 cents

remember WTI has a tick size of 1 cent

the price moved 40 cents

therefore this price move was 40 ticks a

one tick move is equal to \$10 so a gain

of 40 ticks would equal a profit of \$400

losses are calculated in exactly the

same manner as gains the size of the

contract can have a considerable

multiplying effect on a traders profit

or loss before entering a position in

the futures market it's critical that a

trader understand how any price

fluctuation can impact their bottom line

in addition to contract size it is also

important to understand the relationship

between the size of the contract and the

contracts average daily move these two

numbers can help you determine the

potential profit and loss range that

could be expected over one trading day

you