Profit and Loss (P&L)

What is Cumulative P&L?

Cumulative Profit and Loss (P&L) represents the total profit and loss of an investor over a selected period. It accounts for various factors, including:

• Realized Trading P&L: Profits or losses from completed trades.
• Open Positions P&L: Unrealized profits or losses from currently held positions.
• Dividends Received: Income earned from dividend payouts.
• Margin Interest: Costs associated with borrowing on margin.
• Fees: Any applicable trading or account fees.

For detailed information on these components, please refer to the P&L Component section on the Performance page of your account. Note, the P&L values are calculated based on trading and banking activities within your account and are estimates provided solely for informational purposes. They may not represent your actual account profit and loss and do not impact your tax filings. These values do not serve as investment advice.

Day’s P&L Calculation

Today's Sell Value - Today's Purchase Value + Current Market Value - Previous Close Market Value - Today’s Transfers

(Transfers include fees, interest, dividends, and corporate actions)

Scenario 1 – Day’s P&L = Open P&L

You purchase a position during the trading day but do not carry it overnight.

Scenario 2 – Day’s P&L = Realized P&L

You open and close the position within the same trading day.

Additional Note:

For long options that expire worthless, a full loss will appear in the Day’s P&L on the next business day.

The realized loss is calculated as:

Cost Basis + Transaction Fee.

What is Day's P&L?

Day's Profit and Loss (P&L) shows how your investments have performed over the course of a single trading day. This metric helps you understand and track the daily performance of your account.

• End of day value: At the end of the trading day, the total value of the securities in your account is calculated using their closing prices.
• Start of day value: At the beginning of the trading day, the total value of the securities in your account is calculated again. The Daily P&L is then determined by comparing your account's value at the start of the day to its value at the end of the previous trading day.
• Daily transactions: The calculation also adjusts for any trades, dividends, interest, or other transactions that occur during the day to provide a comprehensive view of your account's performance.

What is Open P&L?

Open P/L, also known as unrealized P&L, represents the potential profit or loss on a current position if it were to be closed. The following formula is used to calculate your Open P&L:

(Last Price - Average Cost Basis) * Number of shares you own

This calculation provides an estimate and is meant for informational purposes only. It does not reflect the actual profit and loss in your account. There is no guarantee that the profit or loss shown will be realized when an order is executed. Orders are generally filled at the bid or ask price in the marketplace. In fast-moving or less liquid markets, the execution price can differ significantly from the last quoted price.

Open P&L Calculation for Options

The system calculates Open P&L for options using the mid-price, which is determined by:

(Bid + Ask) / 2

If either bid or ask is missing, the system uses fallback values:

• If the bid is missing, the system defaults to $0.01
• If the ask is missing:

During trading hours, the last trade price is used

During non-trading hours, the previous closing price is used

Example:

If the mid-price is $0.15 for 2 contracts, the expected value is:

$0.15 × 100 × 2 = $30

However, if the bid is missing (i.e., $0), the system defaults to $0.01, which could result in a significantly lower displayed value (e.g., $2 instead of $30).

How do I calculate P&L?

The standard method for calculating the Profit and Loss percentage (P&L%) is:

(Cumulative Income / Initial Cost) * 100%

However, this calculation may be inaccurate if your account includes withdrawals, deposits, or transferred stocks from other brokerages, as these factors are not considered. This can lead to the mistaken belief that all returns are based solely on the initial costs. To provide a more accurate view, we use two different calculation methods: the money-weighted and time-weighted formulas.

How does the time-weighted formula work?

The time-weighted P&L formula is designed to measure the performance of investments over time by minimizing the impact of cash flows such as deposits, withdrawals, and transferred stocks. The formula:

Time-weighted P&L = [(1+profit rate day 1)×(1+profit rate day 2)×…×(1+profit rate day N)−1]×100

Profit rate day = (Today's profit / Beginning assets of the day)

The formula calculates the profit rate daily, considering factors such as deposits, withdrawals, and transferred stocks when determining beginning assets. This approach helps to calculate the daily profit rate, the profit at the midpoint of a trading day, and the cumulative profit over the selected period, thereby minimizing the impact of starting assets.

However, the formula treats each daily return equally without considering the size of the investment, which can lead to inaccuracies if there are frequent or large deposits and withdrawals.

How does money-weighted formula work?

The money-weighted P&L formula takes into account the timing and size of cash flows (such as deposits and withdrawals) to provide a more personalized calculation of returns.

1. Adjusted total beginning assets = Total beginning assets + Total (time-weighted individual net inflow * individual net inflow amount)
2. Time-weighted of an individual net inflow = (Proportion of days in the total time duration since the cash inflow / Total number of days

The formula for money-weighted P&L:

Cumulative Profit Rate = (Cumulative profit / Adjusted total beginning assets)

This formula adjusts the total beginning assets by converting the existing net inflow within the time interval and assigning a weight to it. It considers both the timing and amount of net inflows, adding them to the beginning assets as part of the invested cost.

However, when there are multiple large inflows and outflows during the time period, or if the time interval is too long, the cumulative profit rate may not be as accurate.

Realized P&L

Expired Short Options

• The premium received when the option was opened is reflected in your cash balance.
• The realized P&L from expiration appears on the next business day.
• Formula: Premium Received − Fee

Exercised/Assigned Options

• If a short put is assigned, you’ll purchase the underlying stock at the strike price.
• The realized P&L includes the premium received.
• When you later sell the assigned shares, the premium is factored into the adjusted cost basis of the position.

Cash Mergers

• Formula: Realized P&L = Cash Received − Cost Basis
• Example:

DSKE Cost Basis = $60

Merger Proceeds = $83

Realized P&L = $23

Average Price/Cost Basis

• Cost basis is averaged and only resets if position is fully closed.
• Partial sells do not adjust cost basis.
• Options cost basis is averaged even across strategy types if they share contract terms.

Example:

Opened 1 short put in a spread ($1.00 cost basis).

Opened 1 standalone short put at same strike/expiry ($0.60).

Total cost basis = ($1.00 + $0.60)/2 = $0.80

Both contracts will show as $0.80 cost basis in-app.