Need help calculating prof/losses on spreads?

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Jun 26, 2005
83
1
18
LA
#1
Assume I initiate a bull spread on this hypothetical spread
If XYZ commodity trades in 1000 units, price in $ per unit

On January 1, Feb contract@ $10, March contract @ $11 spread difference of +$1
January15 Feb contract@ $12, March contract @ $ 9 spread difference of +$3
profit $2 or $2000

Here's where I am confused
On January 1 Feb contract @ $10 , March contract @ $ 11 spread difference of +$1
On January15 Feb contract @ $ 9, March contract @ $ 6 spread difference of -$3

I have lossed -$1 on the long. However, I have profited on the short +$5. I understand spreads are traded as spreads and not individual contracts. Would this be a profitable spread? Is my profit +$4 or $ 4000? Or is this a loss?

Much Thanks to anyone who can help.
 
Feb 26, 2005
3
0
11
Melbourne
#2
You confused yourself.

In the first case, if you long March /short Feb contract. Your initial spread is +1 point. On Jan 15, the spread is 9-12=-3. So you're down -4 points or shows $4000 loss. if you long Feb/short March, you'll have $4000 profit.

In the second case, it is the same. On Jan 15 you have $4000 loss should you long March/Short Feb contract and have $4000 profit if you long Feb/short March.

Hope that helps.
 
Mar 28, 2005
345
5
28
Hawaii
#3
Long & Short

What Alp says is correct. One more time. You don’t say much about buying and selling. But I will assume normal nomenclature and call your first the buy or long. And the second your sell or short.
On January 1 Feb contract @ $10 , March contract @ $ 11 spread difference of +$1
It looks to me like you got into the spread with Feb $1.00 below March.
On January 15 Feb contract @ $ 9, March contract @ $ 6 spread difference of -$3
The Feb which you got at $10.00 has gone down to $9.00 costing you a $1.00 of profits. The March, which you sold at $11.00, has fallen to $6.00 for a total profit of $5.00, netting you $4.0
I have lossed -$1 on the long. However, I have profited on the short +$5. I understand spreads are traded as spreads and not individual contracts. Would this be a profitable spread?
You are trading the spread differential. In this case the spread is trending in your favor until it turns.
Is my profit +$4 or $ 4000?
Yes!
 
Jun 26, 2005
83
1
18
LA
#4
Thank both you guys for taking the time. Sorry, for taking so long to thank you Alps. I thought I had already left a "Thank You," post.