What Is a Purchase And Sale Statement?

A purchase and sales (P&S) statement details the sale and offsetting of a futures or options position. The futures commission merchant (FCM) sends the statement to the customer after the position is offset (closed). It includes the number of contracts bought or sold and the prices that were received, the gross profit or loss, commission charges, and the net profit or loss on the transaction. A confirmation statement may accompany it, as well.

Key Takeaways

  • The P&S statement details the prices and effects of transaction in a futures account.
  • It lists the number of contracts of futures or options in the closing trades, as well as changes to balances.
  • This statement is in contrast to a confirmation statement which details the opening of positions.

Understanding Purchase And Sale Statement (P&S)

The P&S statement serves as a summary of the most recent offsetting transaction activity that closes any open positions. It delivers details of the transaction and any changes in margin. It is similar to a receipt for futures transactions. It also reports the new balance of an account, whether through gains or losses on the position, and also when a customer adds or withdraws funds.

In contrast, a confirmation statement, also sent by the futures commission merchant (FCM), details the opening or initiation of a futures or options position. This statement details the number of contracts bought or sold and the prices at which the contracts were bought or sold, as well.

Futures commissions merchants also send P&S statements after other events that alter the account balance. This includes customer deposits, the withdrawal of margin and when the FCM itself puts excess margin in an interest-bearing instrument to maximize the customer's return.

A futures commission merchant plays an essential role in enabling customers to participate in the futures markets. An FCM is an individual or organization, registered with the National Futures Association (NFA), involved in the solicitation or acceptance of buy or sell orders for futures or options on futures in exchange for payment of money (commission) or other assets from customers. An FCM also has the responsibility of collecting margin from customers.

Offsetting Positions

Although not its only function, the purchase and sales statement lets the customer know when an existing position, either long or short, is closed, called offsetting the position. Specifically, an offsetting transaction is an activity that exactly cancels the risks and benefits of another instrument in a portfolio. The trader uses it when it is not possible to close or end the original transaction, as desired. Being unable to close a position frequently happens with options and other more complex financial trading instruments.

For example, if the customer purchased one futures contract, the later sale of that contract is detailed in the P&S. However, if the customer held a short position, the purchase of an equivalent futures contract would offset that short, effectively removing the customer's exposure to that market.

Partial sales and offsets also appear in P&S statements.