Edge Clear - Futures Offset Method

Futures Offset Method (Platform vs. Statement)

Futures Offset Method (Platform vs. Statement) 

Due to different offset methodologies used by the platform and the daily statements, the open position showing on your platform could differ from what shows on your statement. 


Platform Method 

First in First Out (FIFO) 


Statement Method 

Rules for Offsetting Trades 


·         Rule 1: Trades bought and sold during the same trading session (i.e., "day trades") are always offset first, by matching the lowest-price buy with the lowest-price sale, the next-lowest-price buy with the next-lowest-price sale, and so on. If the number of contracts purchased is not equal to the number of contracts sold with in the same session, the resulting open position will either be the highest priced buy or the highest price sale. 

·         Rule 2: If the number of contracts purchased is not equal to the number of contracts sold within a given trading session, the unpaired trades are matched against open positions bearing the oldest trade date (i.e., first-in, first-out, or "FIFO"). 

·         Rule 3: When trades today offset against multiple open positions from a previous date, the lowest-price position from the prior day is offset first. Then the next-lowest-price position is offset. And so on. 




You enter this morning's trading session long one Wheat contract from 875.00 (you purchased this contract on a prior day). Then, you sell one Wheat contract at 915.00. The system will show this morning's sale at 915.00 offsetting against the previous purchase from 875.00, and you would no longer have an open position in the Wheat market. 

However, suppose prior to the close of the trading day, you buy another Wheat contract, this time at 920.00. While you perhaps intended the 875.00 buy and the 915.00 sale to match up, Rule # 1 specifies that purchases and sales in the same trading session are always matched and offset first. So, the statement will match today's 920.00 buy with this morning's 915.00 sale, and your long position from the earlier date, at a price of 875.00, will be shown as the open position listed on your account statement. 


Account Equity 


The important thing to remember is that, despite any differences between how you intended to offset your positions, how they are offset on the platform, and how they are actually offset on the statement, your account equity ends up the same in either case. 

Let's continue the example, and we'll walk you through how the equity in your account remains the same. 


Let's assume that Wheat closes at 925.00 today. In your mind, you bought a contract the other day for 875.00 and sold it this morning for 915.00, a gross profit of $2,000. You also think that you currently should have an open long position from 920.00, which, given today's closing price of 925.00, implies a gross profit of $250. Total gross profit, therefore, is $2,000 + $250, or $2,250. This profit is reflected in the account value. 


Now, according to futures industry conventions, the statement says that you sold one contract this morning at 915.00 and bought one contract this morning for 920.00, a gross loss of <$250>. On the other hand, the statement shows a long position from 875.00 in your account from a previous day, which, given the 925.00 close today, implies a gross profit of $2,500. Total gross profit is ($250) + $2,500, which amounts to $2,250, the same figure you calculated. 

How can the math work out the same in both scenarios?

Open futures positions are "marked-to-the-market," which means that all futures profits and losses are considered to be "realized," even before the position has been offset. In futures trading, it doesn't matter which positions have been offset and which remain open in your account, because the P&L on both closed and open positions flow to your bottom line. 


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