A step-by-step visual guide to how positions are formed, valued at market, and turned into PnL. Built for anyone moving from beginner to intermediate in ETRM and commodity trading.
A position is your net quantity in a given commodity, product, or contract — at a point in time. It answers: “How much am I long or short?”
You get there by adding and subtracting every trade: buys add to a long position (or reduce a short); sells do the opposite. The result can be long (positive), short (negative), or flat (zero).
Positions can be physical or paper — see the next section for how they differ and how they net together.
A physical position is a commitment to take or make delivery of the actual commodity — e.g. barrels of crude at Cushing, MWh of power at a node, or gas at a hub. It is settled by delivery and inventory.
A paper position is financial: futures, swaps, options, or other derivatives that are cash-settled or closed before delivery. You are exposed to price, but you do not take or give the physical product unless you convert (e.g. take delivery on a future).
Positions are often reported separately (physical book vs paper book) and then netted together for an overall exposure. For example: long 100k bbl physical + short 100k bbl futures = flat on paper, but you still have basis risk.
Each trade changes your position. A buy increases how much you own (or reduces a short). A sell does the opposite. Positions are usually rolled up by book, product, delivery month, and sometimes location or counterparty.
New trades, amendments, and cancellations all feed into the same net. So the position you see “as of” a given date is the result of every deal that has been entered and not fully reversed.
Position and PnL are rarely shown as a single number. They are aggregated along dimensions so that traders, risk, and operations can answer: “What am I long/short, where, when, and with whom?”
Book — Trading strategy or desk (e.g. crude desk, power short-term).
Product — Commodity or instrument (WTI, Brent, base power).
Delivery period — Month, quarter, or strip (e.g. Mar 25, Q2 25).
Location — Delivery or pricing point (Cushing, NWE, NBP).
Counterparty — Who you trade with, for credit and exposure.
Slicing by these dimensions lets you see concentration, hedge effectiveness, and where PnL or risk is coming from. The sample table on the right shows a typical roll-up.
| Book | Product | Period | Position | MtM (USD) | Unrealized PnL |
|---|---|---|---|---|---|
| Crude desk | WTI | Mar 25 | +50,000 | 3,500,000 | +80,000 |
| Crude desk | WTI | Apr 25 | −20,000 | −1,440,000 | −15,000 |
| Power ST | Base NWE | Q2 25 | +100 MWh | 4,200 | +200 |
| Gas desk | NBP | Apr 25 | +20,000 MWh | 120,000 | −2,000 |
Typical columns: book, product, delivery period, location (if applicable), position (quantity), MtM, unrealized/realized PnL, and attribution buckets.
Once you have a position (a quantity), you need to put a value on it. Mark-to-market (MtM) does that: it values your position at today’s market price.
The idea is simple: MtM = Position quantity × Current market price. So if you are long 10,000 bbl and the market is $70/bbl, your position is worth $700,000 at market. MtM is the basis for daily PnL and risk reports.
PnL is the profit or loss on your position or trades. For a single deal: you locked in a price when you traded; the market has moved. The difference between that trade price and the current (or settlement) price, times quantity, is your PnL.
If you bought: you gain when the market goes up (you could sell higher). If you sold: you gain when the market goes down (you could buy back lower). So: Buy PnL = (Market − Trade) × Qty; Sell PnL = (Trade − Market) × Qty.
Unrealized PnL is the profit or loss on positions that are still open — valued at today’s market. It can change every day until you close or deliver.
Realized PnL is the actual profit or loss that has been locked in — e.g. when a trade is closed, delivered, or settled. It no longer depends on future prices. Position PnL reports often show both: unrealized (open position at market) and realized (closed/settled).
PnL attribution breaks down the change in PnL from one day to the next into clear drivers. That way traders and control can see whether the move came from market price, new trades, amendments, quantity changes, FX, or costs.
Typical buckets: flat price (market moved), new trades, amendments/cancels, quantity, pricing date, FX, costs, and other. A good report keeps “other” small.
How each is computed:
The position PnL report ties everything together: it shows positions (often by book, product, period), their mark-to-market value, and the PnL — both unrealized and realized — with attribution so you can see what drove the change.
It is usually produced as part of the end-of-day run and lands on desks in the morning.
Traders use it to check their risk and PnL; risk and control use it for limits and reconciliation. Correct prices and trade data are critical.
Position and mark-to-market PnL are direct inputs into risk reports. Two of the most common risk metrics that depend on them are Value-at-Risk (VaR) and limit utilisation.
VaR estimates how much you could lose over a given horizon (e.g. one day) at a given confidence level (e.g. 95%). It uses your positions, volatilities, and correlations — flowing from positions → MtM → sensitivities → VaR. Breaches of VaR limits trigger escalation.
Limit utilisation shows how much of your position or exposure limit you have used (e.g. position vs max allowed per book, product, or counterparty).
Position and PnL reports feed into these checks so that risk and control can see when limits are approached or breached.
Use the panel on the right to play with numbers. Change buys and sells to see the position; then see how that position is valued at market (MtM) and how a single-trade PnL works with buy vs sell.
All three concepts use the same inputs in a real system: trades build positions, positions are marked to market, and PnL is derived from trade price vs market price and quantity.