How Profit/Loss are Calculated in Commodity Futures Contract If I keep The Contract from Day 1 till The Expiry Date?
Let’s directly take an example:
Suppose you buy 1 lot Crudeoil Sep future today at 3150 and hold it till expiry which is 19 Sep and the future closes at 3250 on the expiry day, then your profit is (3250-3150)*1 lot Crudeoil future. The trading unit of Crudeoil fut is 100 barrels and the base unit is 1 barrel, so if you have 1 lot and the fut moves up by Rs.1, then you make Rs.100 for every 1 rupee movement in the fut.
Coming back to the profit of your position, your profit will be (3250-3150)* 1 lot Crudeoil fut= 100*100 = Rs.10,000.
Now let’s see how future contracts are settled - They are settled on a daily basis. What this means is if you make a 500 rupee profit today, then your commodity obligation amount is + Rs.500 which means that this amount will be credited to your commodity account today. If you make a 300 rupee loss the next day, then your commodity obligation amount is - Rs.300 which means that this amount will be debited from your commodity account the next day.
But the net profit according to the example we’ve taken is Rs.10,000 and after all the daily settlements taken into consideration, the net daily settlements will add up to Rs.10,000 at expiry.
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