I read on X about a discussion regarding Kols sharing a short position image (short selling) of OM but the PNL is larger than the volume.

This relates to understanding the nature of short orders (short selling) and how to calculate profit and loss relative to the volume of the order. I will explain in detail and include real examples on Binance for easier understanding:

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1. Concept: Short Volume and Profit

• Volume when shorting (called notional value) is the total value of the assets you sell.

• Profit when shorting comes from buying back the asset at a lower price than the original selling price.

• Because the asset cannot decrease below 0, the profit when shorting is always limited, less than the volume of the order, and the maximum profit = volume if the price goes to 0.

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2. Specific example of shorting crypto on Binance

Suppose you are shorting BTCUSDT.

INFORMATION:

• Current BTC price: 100,000 USDT

• You use 1,000 USDT as margin, leverage x10

=> Volume of the order = 10,000 USDT, meaning you are borrowing 10k USDT to sell BTC at the price of 100k.

SUCCESSFUL SHORT SCENARIO:

• BTC drops from 100,000 → 90,000

• You close the position (buy back) at the price of 90,000

• Difference: 10,000 USDT x 10% = profit of 1,000 USDT

=> So your profit is 1,000 USDT, which is equal to 100% of the margin capital, but only equal to 10% of the order volume.

Maximum profit if BTC goes to 0:

• You will profit the entire 10,000 USDT (because you sold 10k, bought back at the price of 0)

• However, even if BTC goes to 0, you can only profit a maximum of 10,000 USDT, which is equal to the volume, and cannot exceed that.

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3. Conclusion

• Profit from short orders is always ≤ volume.

• In reality, profit is always less than volume, because the asset does not go to 0 and you usually exit the position beforehand.

• Conversely, if the price increases, you can lose more than the margin capital (account depletion) depending on the leverage.