Calculating your equity in a financial position varies according to the market in question. Still, the principle remains the same across different financial markets. Equity is the measure of the value of a position at any given time based on your position size and the current market price.
Identify the position size. In the stock market, your position size is the number of shares you own in a particular stock. In the futures and Forex markets, position size is measured by how many contracts you own in a given futures or currency market. Additionally, each contract represents a specified quantity of the underlying commodity or currency in question. For example, one futures contract for light crude oil represents 1,000 barrels.
Identify the unit value. This equates to the share price in the stock market. In the futures and currency markets, the value is the difference between the current price or exchange rate and the price or exchange rate at which you purchased or sold a contract.
Multiply the position size by the appropriate value. This calculation is very simple for stocks because all you have to do is multiply the share price by the number of shares you own. For example, if you own 100 shares of ABC stock and the share price is $15, your equity in the position is $1,500.
Calculate equity using contract specifications for futures and Forex positions. First, determine the underlying quantity represented by the contract, multiply that by the number of contracts you hold and then multiply that value by the difference between the purchase price and the current price.
For example, assume you purchase 2 crude oil futures contracts at $92 and the market is currently trading at $95. Since each contract represents 1,000 barrels, your equity is 1,000 (barrels) x 2 (contracts) x $3 or $6,000.
Forex contracts are similar in that each contract represents a set quantity of the base currency, typically 100,000 units. For example, if you buy a contract for the Australian dollar (AUD/USD) and the value of the Australian dollar rises by $.0023, your equity in the position is 100,000 x $.0023, or $230.
Adam Parker is a writer from Virginia. He holds a Bachelor of Science from James Madison University. Parker has written articles for online sources including The Motley Fool, Gameworld Network and Glossy News.