How do I calculate profit and loss (P/L), mark-to-market method?

Mark-to-Market Valuation Explained

The mark-to-market method values positions based on their current market price, providing an up-to-date reflection of their worth.

Let us assume in March there was a purchase of 50 units of stock XYZ at a price of GBP 15 each, and a commission of 2%. The total cost of the transaction is GBP 750 plus the GBP 15 commission. The total costs incurred are calculated as:

At the end of the day, the XYZ stock price has increased to GBP 16. The current market value of the position for XYZ is:

Using the mark-to-market valuation method, the Instrument P/L for stock XYZ on Day 1 is:

The following day, the market price for XYZ stock has increased to GBP 16.50 by the end of the day. The end-of-day current value (Position Value), at the end of Day 2 is:

And given that the Position Value at the end of Day 1 was GBP 800, and this is the opening Position Value used at the start of Day 2. The Position Value at the end of Day 2 is GBP 825. The profit/loss for stock XYZ, using the mark-to-market valuation is calculated as:

How to determine PnL for tax reporting

The Portfolio Report shows the Profit & Loss breakdown, in client currency. The value of the positions is calculated using mark-to-market valuation.

To download the Portfolio Report: Account > Download Reports > Portfolio Report > Select account and time date -> PDF to download

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The mark-to-market value of a position, at the end of a given period, is shown on the Portfolio Report. It can be read as:

• Value at the beginning of period – the Position Value at the end of last period e.g. 31^st December 2019, which is the Position Value at the beginning of the current valuation period e.g. 1^st January 2020
• Cash Bookings – this is the Transaction Value to open the position e.g. 50 units of XYZ at GBP 15 and a commission of 2%. Then the Cash Bookings are equal to the Transaction Value of opening the position which is GBP 750 plus the GBP 15 for commission
• Value at the end of the period – the Position Value at the end of the period, where the portfolio holds 50 units of XYZ at a current market value of GBP 16.50
• Profit & Loss – is the Instrument Position P/L, which is the difference between the Position Value at the end-of-period and the Position Value at the beginning-of-period or the difference between Position Value at the end-of-period and the Cash Bookings
• Costs – any trading activity costs related to the security e.g. commissions, margins
• P/L ex. costs – the Instrument Position P/L, costs incurred to open the position are not accounted for

Below is an example from the Portfolio Report, using the scenario above of stock XYZ:

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