Flattening an open position to a net zero (or flat) position

Detail

Trading activity in general leads to opening positions, and very often to closing out those positions before the delivery period

For example I may sell 10,000 therms of gas for delivery May 2024 today

I have an open position of 10,000 therms in 2024

Next year the price has dropped and I decide to buy back all 10,000 therms at the lower price, thus locking in a profit

(sell price - buy price) x 10,000

remember when we short a position we make a profit when the price drops!

I have no remaining open position in 2024 gas - so I have closed out my position

I can always re-open it by executing another trade

If my second trade had been to buy 6,000 therms then I would have closed out 6,000 therms, and have 4,000 therms remaining open position

Closing out a Futures position on an Exchange has an additional meaning and consequence

The profit or loss value would immediately be considered as realized P&L for the following reasons: