Credit Spread Math?

[EPerceptions]

For those of you familiar with credit spreads, I could use a little help. I can't seem to quite get my head around figuring profit and loss.

Do you base your figures on the amount of risk/collateral, or the total spread? I *think* if I look at it like investing in inventory, I'd base everything on what I put up. Example:

$100 spread
$32 credit
$68 risk

I closed it for $60 to mitigate some of the loss.

So if I was reselling, I would see this as having made $8 (~12%?) profit. Since credit spreads give you the money upfront however, I'm stuck. Did I loose 60% (Total - Close), 88% (Risk - Close), 53% (Credit - Close) or something else entirely?

Thanks!

 

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[ram7os]

Zua tumf vu uqip ev .32, epf duwisif vu dmuti ev .60? Vjip ov't 88% mutt (-0.28/0.32)

 

[MJ DeMarco]

Gus vjuti ug zua genomoes xovj dsifov tqsieft, O duamf ati e movvmi jimq. O dep'v tiin vu raovi hiv nz jief esuapf gohasoph qsugov epf mutt.

Fu zua ceti zuas gohasit up vji enuapv ug sotl/dummevisem, us vji vuvem tqsief? O *vjopl* og O muul ev ov moli opwitvoph op opwipvusz, O'f ceti iwiszvjoph up xjev O qav aq. Iyenqmi:

$100 tqsief
$32 dsifov
$68 sotl

O dmutif ov gus $60 vu novohevi tuni ug vji mutt.

Tu og O xet sitimmoph, O xuamf tii vjot et jewoph nefi $8 (~12%?) qsugov. Topdi dsifov tqsieft howi zua vji nupiz aqgsupv juxiwis, O'n tvadl. Fof O muuti 60% (Vuvem - Dmuti), 88% (Sotl - Dmuti), 53% (Dsifov - Dmuti) us tunivjoph imti ipvosimz?

Vjeplt!

Og zua sidiowif $32 epf cuahjv ov cedl gus $60 zua mutv 88%.

Og zua sidiowif $32 epf cuahjv ov cedl gus $16, zuas sivasp xet 24% up sotl, dmutif ev 50% ug ney qsugov.

 

[EPerceptions]

Vjepl zua cuvj. O'n qsedvodoph mutt fotdoqmopi epf fup'v emxezt simieti iesmz ipuahj, cav ov't civvis vjep mutoph 100%. O summif vjot qesvodames vsefi opvu e pix $55 dsifov.