From 4996bc2aaddf5ba56c29a71f854c611366b79d2c Mon Sep 17 00:00:00 2001
From: mindesbunister <github_service@egonetix.de>
Date: Fri, 7 Nov 2025 14:53:03 +0100
Subject: [PATCH] Fix SHORT position P&L calculation bug
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CRITICAL BUG FIX: SHORT positions were calculating P&L with inverted logic,
causing profits to be recorded as losses and vice versa.

Problem Example:
- SHORT at $156.58, exit at $154.66 (price dropped $1.92)
- Should be +~$25 profit
- Was recorded as -$499.23 LOSS

Root Cause:
Old formula: profitPercent = (exit - entry) / entry * (side === 'long' ? 1 : -1)
This multiplied the LONG formula by -1 for shorts, but then applied it to
full notional instead of properly accounting for direction.

Fix:
- LONG: priceDiff = (exit - entry) → profit when price rises
- SHORT: priceDiff = (entry - exit) → profit when price falls
- profitPercent = priceDiff / entry * 100
- Proper leverage calculation: realizedPnL = collateral * profitPercent * leverage

This fixes both dry-run and live close position calculations in lib/drift/orders.ts

Impact: All SHORT trades since bot launch have incorrect P&L in database.
Future trades will calculate correctly.
---
 lib/drift/orders.ts | 28 +++++++++++++++++++++-------
 1 file changed, 21 insertions(+), 7 deletions(-)

diff --git a/lib/drift/orders.ts b/lib/drift/orders.ts
index 458e9ff..ccd09e8 100644
--- a/lib/drift/orders.ts
+++ b/lib/drift/orders.ts
@@ -527,10 +527,18 @@ export async function closePosition(
       console.log('🧪 DRY RUN MODE: Simulating close order (not executing on blockchain)')
       
       // Calculate realized P&L with leverage (default 10x in dry run)
-      const profitPercent = ((oraclePrice - position.entryPrice) / position.entryPrice) * 100 * (position.side === 'long' ? 1 : -1)
+      // For LONG: profit when exit > entry → (exit - entry) / entry
+      // For SHORT: profit when exit < entry → (entry - exit) / entry
+      const priceDiff = position.side === 'long' 
+        ? (oraclePrice - position.entryPrice)  // Long: profit when price rises
+        : (position.entryPrice - oraclePrice)  // Short: profit when price falls
+      
+      const profitPercent = (priceDiff / position.entryPrice) * 100
       const closedNotional = sizeToClose * oraclePrice
-      const realizedPnL = (closedNotional * profitPercent) / 100
-      const accountPnLPercent = profitPercent * 10 // display using default leverage
+      const leverage = 10
+      const collateral = closedNotional / leverage
+      const realizedPnL = collateral * (profitPercent / 100) * leverage
+      const accountPnLPercent = profitPercent * leverage
       
       const mockTxSig = `DRY_RUN_CLOSE_${Date.now()}_${Math.random().toString(36).substring(7)}`
       
@@ -578,8 +586,13 @@ export async function closePosition(
     console.log('✅ Transaction confirmed on-chain')
     
     // Calculate realized P&L with leverage
-    // CRITICAL: P&L must account for leverage and be calculated on USD notional, not base asset size
-    const profitPercent = ((oraclePrice - position.entryPrice) / position.entryPrice) * 100 * (position.side === 'long' ? 1 : -1)
+    // For LONG: profit when exit > entry → (exit - entry) / entry
+    // For SHORT: profit when exit < entry → (entry - exit) / entry
+    const priceDiff = position.side === 'long' 
+      ? (oraclePrice - position.entryPrice)  // Long: profit when price rises
+      : (position.entryPrice - oraclePrice)  // Short: profit when price falls
+    
+    const profitPercent = (priceDiff / position.entryPrice) * 100
     
     // Get leverage from user account (defaults to 10x if not found)
     let leverage = 10
@@ -593,9 +606,10 @@ export async function closePosition(
       console.log('⚠️ Could not determine leverage from account, using 10x default')
     }
     
-    // Calculate closed notional value (USD)
+    // Calculate closed notional value (USD) and actual P&L with leverage
     const closedNotional = sizeToClose * oraclePrice
-    const realizedPnL = (closedNotional * profitPercent) / 100
+    const collateral = closedNotional / leverage
+    const realizedPnL = collateral * (profitPercent / 100) * leverage  // Leveraged P&L
     const accountPnLPercent = profitPercent * leverage
     
     console.log(`💰 Close details:`)