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Marked profit after a move

Market makingMedium

A market maker buys $6$ units at $100$ when the mid price is $100$ . The mid price then rises to $101$ , and the market maker sells $2$ units at $101.5$ . Later the mid price settles at $100.5$ . What is the total profit with the remaining position marked at $100.5$ ?

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Hint

Add the cash flows and the value of the remaining units.

Solution

Cash is $- 6 \times 100 + 2 \times 101.5 = - 600 + 203 = - 397$ .
The remaining $4$ units are worth $4 \times 100.5 = 402$ .
The total profit is $402 - 397 = 5$ .

Answer: $5$

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