Hi allI am trying to calculate returns for a futures position, but am not sure anymore if I am calculating the correct return for my short positionI can calculate the simple return of a long futures contract by V(final)/V(initial)-1, but how does the calculation look for the short position?Thank you for your help

First, you'd have to be clear about what you mean by "return". Commonly, it would be the capital gains on an investment you made. And this is where you have to be careful when dealing with futures contracts. When taking a long or short position in a futures contract, in contrast to cash transactions, there are no initial cash-flows apart from the margin payments. Thus, using F(T) / F(0) - 1 in case of a long position gives you the relative price change of the futures but not the return on the capital invested. If this is what you are looking for then you could use the minus that value for the short position. Otherwise, you'd have to relate it to the initial margin (and possibly interest paid on your margin account and deposits/withdrawals during the time you hold the futures position).

there is no reason why f2/f1-1 cannot be used to figure out the return on a futures position. But you should remember that this is the "excess" return and for you to get the "total" return you should include your "collateral" returns.

dupe

Thank you both!the collateral returns would then mean the interest on the margin placed in my margin account?

then, Daveangel can you make your "collateral returns" point totally clear to us, please?and what if ** in the real world ** the trader use log(F(T)/F(0))?

QuoteOriginally posted by: edouardthen, Daveangel can you make your "collateral returns" point totally clear to us, please?and what if ** in the real world ** the trader use log(F(T)/F(0))?its not that complicated. I simply mentioned it for completeness. Let us say you have 100 to invest and you can either do so in the spot market or the futures market. then if if you choose to invest through a futures market, then to compare the returns from both you have to add the returns on your cash. so the total return on your futures position istr = excess return (f2/f1-1) + interest earned on cash.let us take an example - if the spot price is 100 and the futures price today is 102 where the 2 is entirely due to interest charges then at maturity of the futures contract if the spot market is still at 100 then the rate of return on the spot is zero however the rate of return in the futures is -2%. However, the total return to the investor in the futures is still zero because he or she would have earned 2 by leaving their money on deposit or in T bills.