How is the position value determined ? Is it based on the Bid price or Ask price or other value ?

Hi guys,

How is the position value determined ? Is it based on the Bid price , Ask price or the last traded price once you have made a trade - either long or short position.



Thank you

 

Traditionally longs at the bid - shorts at the ask. Some more added granularity dependent on the product.

 

The value of your position is based on the price of your position. If, for example, you went long on stock A for $100.00, your position is valued at $100.00 for your one share/lot whatever.

I think what you seem to be asking here is that after you have your position, how is it compared to what the market does after that?

After you have your position, your position is compared, on paper, to the last trade price. Not the bid, not the offer, but the last traded price.

So if, for example, your $100.00 position is in a super thin market, and the last trade price is, say, 5 bux, you will settle at 1 share/lot at 5 bux. So you are down 95 bux. This is a very extreme example, because practically nothing on a regulated exchange goes that way.

Then there is settlement value based upon the metrics set forth by the exchange that the lot is traded on. They usually have formulae that smooths it out.

 

For Stocks:
Last sale of the primary where the stock is listed at the close. During the day, the last sale.
For Options:
Mid-point of the NBBO. (National Best Bid Best Offer)

 

Thank you Robert.

Also, how is it calculated for index Futs ?

 

Here's an example for the ES.

https://www.cmegroup.com/confluence/display/EPICSANDBOX/Standard+and+Poors+500+Futures

 

So basically, the settlement price is based on, yes, the final 30 seconds of trading before the 4:15 PM ET halt. Kinda' crazy, heh.

 

CME futures are the last sale during the day and whatever the CME saysthe settlement price is at EOD.

 

Hi Robert,

Suppose we have a short position on an ES option, does the Mid-point of NBBO mean that if the best Ask is very high (perhaps outside the regular trading hours) - then this could result in a big change to the position value and create a spike in Margin requirements, even if there was no trade that happened at that high value ?

 

The CME determines end of day settlement of every option.
There is no NBBO for CME options, just the CME.
There are no "outside regular trading hours" with futures, but there are wider spreads when US markets are not open. It is up to your FCM to determine marks while trading is open. They might use the mid-point or last sale but if that is going to make a big difference, you need more money in your account for that size.