====================================================
Understanding how to calculate unrealized PnL in perpetual futures is critical for every trader, from beginners navigating their first crypto positions to professional investors managing complex strategies. Unrealized PnL (Profit and Loss) reflects the floating gains or losses of open contracts before they are closed. It is a key measure of position health, risk exposure, and capital efficiency.
This article provides a comprehensive guide to calculating unrealized PnL in perpetual futures, explores different methodologies, compares their strengths and weaknesses, and integrates practical experience to help traders make informed decisions.
What is Unrealized PnL in Perpetual Futures?
Definition
Unrealized PnL (also known as floating PnL) represents the profit or loss of an open futures position based on the current market price compared to the entry price. It is “unrealized” because the position is still open; closing the trade converts it into realized PnL.
Why Unrealized PnL Matters
- Risk assessment: Helps traders gauge exposure in volatile markets.
- Margin management: Exchanges use unrealized PnL to determine available margin for new positions.
- Strategy optimization: Knowing when to hold or close a position often depends on tracking unrealized PnL accurately.
In fact, why monitor unrealized PnL in perpetual futures trading is simple: it’s the heartbeat of open trades, and ignoring it can lead to forced liquidations.
Key Formula for Unrealized PnL
The calculation of unrealized PnL in perpetual futures depends on whether the position is long or short:
- Long position:
UnrealizedPnL=(MarkPrice−EntryPrice)×PositionSizeUnrealized PnL = (Mark Price - Entry Price) \times Position SizeUnrealizedPnL=(MarkPrice−EntryPrice)×PositionSize
- Short position:
UnrealizedPnL=(EntryPrice−MarkPrice)×PositionSizeUnrealized PnL = (Entry Price - Mark Price) \times Position SizeUnrealizedPnL=(EntryPrice−MarkPrice)×PositionSize
Where:
- Entry Price = average price at which contracts were opened.
- Mark Price = exchange’s reference price used to avoid manipulation.
- Position Size = number of contracts × contract value.
Unrealized PnL calculation example
Method 1: Mark Price-Based Calculation
Most exchanges, such as Binance or Bybit, calculate unrealized PnL using the mark price.
Advantages
- Protects against market manipulation during thin liquidity.
- Reduces unnecessary liquidations.
Drawbacks
- Unrealized PnL may differ significantly from what you’d get if you closed at the last traded price.
- Can be confusing for beginners.
Method 2: Last Traded Price-Based Calculation
Some traders prefer calculating unrealized PnL using the last traded price for a more immediate reflection of actual market activity.
UnrealizedPnL=(LastTradedPrice−EntryPrice)×PositionSizeUnrealized PnL = (Last Traded Price - Entry Price) \times Position SizeUnrealizedPnL=(LastTradedPrice−EntryPrice)×PositionSize
Advantages
- More accurate in fast-moving markets.
- Aligns with the exact price you could execute at.
Drawbacks
- Highly volatile during low-liquidity periods.
- Greater risk of sudden liquidation due to short-term spikes.
Mark Price vs Last Price Comparison
Comparing the Two Approaches
| Metric | Mark Price Method | Last Traded Price Method |
|---|---|---|
| Stability | High | Low |
| Accuracy for Execution | Medium | High |
| Manipulation Resistance | Strong | Weak |
| Best for | Risk control, margin management | Active scalpers, high-frequency traders |
Recommendation: Most traders should rely on mark price-based unrealized PnL, while professionals in highly liquid markets may supplement calculations with last traded price.
Managing Unrealized PnL Risks
Use Stop-Loss and Take-Profit
Automated exit strategies prevent unrealized PnL from turning into severe realized losses.
Monitor Funding Rates
Funding impacts PnL over time in perpetual contracts. Traders should adjust exposure to avoid erosion of unrealized profits.
Hedge with Counter-Positions
Experienced traders balance unrealized exposure with offsetting positions, reducing volatility impact.
Here, it’s essential to understand how unrealized PnL affects trading strategy in perpetual futures—it can determine whether a trader adopts a more aggressive approach or reduces exposure.
Case Example: Long BTC Position
- Entry Price: $25,000
- Mark Price: $27,500
- Position Size: 1 BTC
UnrealizedPnL=(27,500−25,000)×1=\(2,500Unrealized PnL = (27,500 - 25,000) \times 1 = \\)2,500UnrealizedPnL=(27,500−25,000)×1=$2,500
For a short position with the same parameters:
UnrealizedPnL=(25,000−27,500)×1=−\(2,500Unrealized PnL = (25,000 - 27,500) \times 1 = -\\)2,500UnrealizedPnL=(25,000−27,500)×1=−$2,500
This highlights how identical parameters can generate profits or losses depending on direction.
BTC Futures Unrealized PnL example
Advanced Insights: Professional Approaches
Weighted Average Entry Price
For traders scaling in or out, using a weighted average entry ensures precise PnL.
Cross vs. Isolated Margin Implications
- Cross margin shares unrealized PnL across positions.
- Isolated margin ties unrealized PnL strictly to one position.
Institutional Risk Models
Institutions often implement stress tests to see how unrealized PnL changes under extreme volatility.
FAQs: Calculating Unrealized PnL in Perpetual Futures
1. What’s the difference between realized and unrealized PnL?
- Unrealized PnL: Open position gains/losses, still subject to change.
- Realized PnL: Locked-in profit or loss after closing the position.
2. Why does my unrealized PnL change even when I don’t trade?
Because it updates in real time based on the mark price. Price fluctuations, funding fees, and contract mechanics can all cause changes.
3. Where can I find unrealized PnL metrics for perpetual futures?
Most exchanges display unrealized PnL directly in the trading dashboard. However, advanced traders may export raw data to spreadsheets or analytics platforms for deeper insight.
Conclusion: Mastering Unrealized PnL
Learning how to calculate unrealized PnL in perpetual futures is essential for both risk management and strategy execution. While mark price calculations are most reliable for margin and liquidation monitoring, last traded price calculations can help scalpers fine-tune exits.
By combining both perspectives—and applying strict risk controls—you can transform unrealized PnL from a confusing floating number into a powerful tool for informed decision-making.
Step-by-step guide to unrealized PnL monitoring
💡 Did this article help you understand how to calculate unrealized PnL in perpetual futures? Share your thoughts in the comments, and spread this guide with fellow traders to help them avoid costly mistakes.