Payoff Diagrams Ok boys and girls, let's walk thru this thing again. Long Futures Let's say we're trading some instrument. It can be anything - DBS shares, USD's (viewed as a commodity, paid for in SGD), whatever. The concepts remain the same. Let's assume the instrument trades in incremental values of $1 Let's assume we are long the underlying instrument at the price of $5, and that's the only position we have. Our P&L profile will look like this: Current Price of Underlying Instrument
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
Long at $5
-$4
-$3
-$2
-$1
$0
$1
$2
$3
$4
$5
At the price of $5, our P&L is zero (assuming no transaction costs). As prices of the underlying rise above $5, we start making money. As they fall below $5, we start losing money.
Long at $5 Profit $6
Long at $5
$4 $2 $0 -$2
1
2
3
-$4
4
5
6
7
8
9
10
current price
-$6 Loss
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