Futures Payoffs — Long and Short
A futures payoff is linear and symmetric. Long futures profits ₹1 for every ₹1 the underlying rises above the entry price, and loses ₹1 for every ₹1 it falls. S...
Linear Payoff
A futures payoff is linear and symmetric. Long futures profits ₹1 for every ₹1 the underlying rises above the entry price, and loses ₹1 for every ₹1 it falls. Short futures is the mirror image. Both profit and loss are unlimited — there is no built-in floor or ceiling.
The payoff line of a long futures is a 45° line passing through the entry price — above that point it's profit, below it's loss. Short futures reflects the line to produce the opposite P&L. Because both sides have unlimited P&L, futures are "zero-sum" — every rupee the long makes, the short loses. The payoff per contract = (Exit Price − Entry Price) × Lot Size for long; reverse for short.
Every ₹1 move = ₹1 P&L per share — perfectly linear
Long and short are exact mirror images
No cap on profit, no floor on loss
One side's gain = other side's loss, rupee-for-rupee
A Practical Example
| Underlying at Expiry | Long Futures P&L | Short Futures P&L |
|---|---|---|
| 50 | −50 | +50 |
| 75 | −25 | +25 |
| 100 (breakeven) | 0 | 0 |
| 125 | +25 | −25 |
| 150 | +50 | −50 |
What Makes This Important
Futures Payoff Formula
Long P&L = (ST − F0) × Q Short P&L = (F0 − ST) × Q
Frequently Asked Questions
No. Unlike forwards, futures P&L is marked-to-market every day and flows through the margin account. On expiry, only any residual P&L since the previous day's close is settled.
🧠 Quick Quiz
2 questions to check your understanding