11.8How does futures profit and loss work?
1What is it?
Profit/loss = (Exit − Entry) × Lot for a long (buy); the reverse for a short (sell).
2Why does it exist?
It moves rupee-for-rupee with the underlying. Futures payoff is a straight line: unlimited on both sides in practice.
3Diagram
Max profit
Unlimited
Max loss
₹16,25,000
Breakeven
₹25,000
4Calculation
- Long at 25,000, exit at 25,400: +400 × 65 = +₹26,000.
- Exit at 24,600: −400 × 65 = −₹26,000.
- On ~₹1.95 lakh margin, that’s ±13%, from a 1.6% index move.
Small index moves cause big % changes on margin.
5Quick revision
- Linear payoff.
- Long gains when price rises; short gains when it falls.
- Leverage magnifies % P&L.
6Knowledge check
Q1. Short 1 lot at 25,000, exit 24,700. P&L?Show answer
+300 × 65 = +₹19,500.
Q2. Is futures loss limited?Show answer
No.
Q3. Why does a 1.6% move give ~13% on margin?Show answer
Because of ~8× leverage.