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Changes to profit calculations for derivatives quoted in a foreign currency

Posted By dplaisted 7 Years Ago

Changes to profit calculations for derivatives quoted in a foreign...

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Posted Monday December 27 2010
We are planning to make a change in how RightEdge calculates profit/loss. It will apply to derivatives (symbols with an asset type of Future, Option, or FutureOption) where the margin in the symbol information is greater than zero.

With the current profit calculations, the entire value of the position (ie position size * contract size * price) is subject to currency risk. The current formula for profit is: ((price at exit * exchange rate at exit) - (price at entry * exchange rate at entry)) * position size * contract size.

With the change we are making, profit will be computed in the symbol currency and then converted to the account currency. So the new formula for the profit will be (price at exit - price at entry) * exchange rate at exit * position size * contract size.

We think that this is more likely to match the way a broker would calculate the profit for a derivative position in a foreign currency. If it doesn't for your broker, let us know and we will consider adding an option to allow you to control how the profit is calculated.

Thanks,
Daniel


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