> ## Documentation Index
> Fetch the complete documentation index at: https://docs.ascend.market/llms.txt
> Use this file to discover all available pages before exploring further.

# PnL & Leverage Basics

> How profits and losses actually scale with moves

On Ascend, you profit or lose based on how the probability price moves relative to your entry price. This is scaled by your position size and leverage.

<Note>
  PnL updates continuously as prices change. You do not have to wait for event resolution to see gains or losses.
</Note>

***

## The PnL Formula

Unrealized PnL is calculated using four inputs:

| Input         | What It Means                                      |
| ------------- | -------------------------------------------------- |
| Entry Price   | The probability price when you opened the position |
| Mark Price    | The current probability price used for valuation   |
| Position Size | How large your position is                         |
| Direction     | +1 for LONG, -1 for SHORT                          |

The formula:

```
Unrealized PnL = Direction × Position Size × (Mark Price − Entry Price)
```

This applies symmetrically to LONG and SHORT positions.

***

## PnL Examples

<AccordionGroup>
  <Accordion title="LONG position, probability rises" icon="arrow-up">
    You open LONG at 50% with position size 1,000 USDC notional.

    Probability rises to 58%.

    ```
    PnL = +1 × 1,000 × (0.58 − 0.50)
        = +1 × 1,000 × 0.08
        = +80 USDC
    ```

    You are up 80 USDC.
  </Accordion>

  <Accordion title="LONG position, probability falls" icon="arrow-down">
    You open LONG at 50% with position size 1,000 USDC notional.

    Probability falls to 44%.

    ```
    PnL = +1 × 1,000 × (0.44 − 0.50)
        = +1 × 1,000 × (−0.06)
        = −60 USDC
    ```

    You are down 60 USDC.
  </Accordion>

  <Accordion title="SHORT position, probability falls" icon="arrow-down">
    You open SHORT at 65% with position size 1,000 USDC notional.

    Probability falls to 58%.

    ```
    PnL = −1 × 1,000 × (0.58 − 0.65)
        = −1 × 1,000 × (−0.07)
        = +70 USDC
    ```

    You are up 70 USDC.
  </Accordion>

  <Accordion title="SHORT position, probability rises" icon="arrow-up">
    You open SHORT at 65% with position size 1,000 USDC notional.

    Probability rises to 72%.

    ```
    PnL = −1 × 1,000 × (0.72 − 0.65)
        = −1 × 1,000 × 0.07
        = −70 USDC
    ```

    You are down 70 USDC.
  </Accordion>
</AccordionGroup>

***

## How Leverage Works

Leverage allows you to control a larger position with less capital.

The relationship between margin and position size:

```
Initial Margin = Position Notional / Leverage
```

Or flipped:

```
Position Notional = Initial Margin × Leverage
```

<CardGroup cols={2}>
  <Card title="1x Leverage" icon="1">
    100 USDC margin controls 100 USDC notional. A 10% probability move means 10 USDC PnL.
  </Card>

  <Card title="10x Leverage" icon="10">
    100 USDC margin controls 1,000 USDC notional. A 10% probability move means 100 USDC PnL.
  </Card>
</CardGroup>

Higher leverage increases sensitivity to probability movement. The same price change creates a larger PnL impact.

***

## Leverage Example

You have 100 USDC and want to go LONG at 50%.

<Tabs>
  <Tab title="5x Leverage">
    **Position notional:** 100 × 5 = 500 USDC

    Probability rises from 50% to 55% (5 point move).

    ```
    PnL = 500 × 0.05 = +25 USDC
    ```

    Return on margin: 25%
  </Tab>

  <Tab title="10x Leverage">
    **Position notional:** 100 × 10 = 1,000 USDC

    Probability rises from 50% to 55% (5 point move).

    ```
    PnL = 1,000 × 0.05 = +50 USDC
    ```

    Return on margin: 50%
  </Tab>

  <Tab title="20x Leverage">
    **Position notional:** 100 × 20 = 2,000 USDC

    Probability rises from 50% to 55% (5 point move).

    ```
    PnL = 2,000 × 0.05 = +100 USDC
    ```

    Return on margin: 100%
  </Tab>
</Tabs>

The same 5 point move produces 25, 50, or 100 USDC depending on leverage. This works in both directions. Losses scale the same way.

***

## Leverage Cuts Both Ways

Higher leverage amplifies losses just as it amplifies gains.

| Leverage | 5 Point Gain | 5 Point Loss |
| -------- | ------------ | ------------ |
| 5x       | +25 USDC     | -25 USDC     |
| 10x      | +50 USDC     | -50 USDC     |
| 20x      | +100 USDC    | -100 USDC    |

With 20x leverage, a 5 point move against you wipes your entire 100 USDC margin.

Leverage operates within explicit market-defined limits to ensure consistent risk behavior.

***

## Mark-to-Market

Positions are continuously marked to the mark price.

This means:

<Check>PnL updates in real time as probabilities move</Check>
<Check>Your equity (margin + unrealized PnL) changes constantly</Check>
<Check>Risk checks run against current mark price, not entry price</Check>

You always know where you stand. No waiting for settlement to see your position value.

***

## Position Lifecycle

A position on Ascend follows a clear lifecycle:

<Steps>
  <Step title="Open">
    You open a LONG or SHORT position with defined margin and leverage.
  </Step>

  <Step title="Update">
    As probability prices change, PnL and risk metrics update in real time.
  </Step>

  <Step title="Manage">
    You may increase, reduce, or partially close the position at any time within market rules.
  </Step>

  <Step title="Close">
    The position is closed voluntarily by you or through system-defined processes like liquidation or settlement.
  </Step>
</Steps>

Each stage follows deterministic mechanics governed by market parameters.

***

<Card title="Next: Perpetual Market Structure" icon="arrow-right" href="/core-concepts/perpetual-market-structure">
  Learn how perpetual markets work without expiry
</Card>