Why does P&L in Kite positions not match with gains on the funds page?
When trading there are two platforms that you use - the trading platform where you trade (Kite) and the back office platform (Console) that maintains your ledger/account balance, which is reported to the exchanges. While the overall P&L will be the same on both the platforms, the daily P&L or credit/debit on ledger might differ.
You can check the P&L as per your original entry price on Kite positions whereas, the P&L on funds page will show based on the last M2M settlement price for all open futures and short options positions.
For accounting purposes or for crediting/debiting the ledger there is a set standard exchange process for all futures positions - which is called Marked to market or M2M. Exchanges at end of everyday marks all open futures position to the closing settlement price for the futures for that day and either credits or debits the money to the client ledger.
- The reason for doing M2M is because futures have unlimited risk and to ensure the person making losses doesn’t default, for open positions the losses are collected on the same day and credited to the person making profits. The person who made the loss will now have to ensure that there is sufficient margin in the account to continue holding the position and hence ensuring there is no counterparty risk.
- For short option positions, there is no M2M like futures, but margin required to hold short options keep going up as and when options go in the money (short options start losing money), thus in a way ensuring that the customer losing brings in more money to avoid the default risk
Learn more about Kite Positions and Realised/Unrealised gains on the funds page in this TradingQ&A post.
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