Unrealized Profit & Loss

What Is Unrealized Profit & Loss?

Unrealized profit and loss refers to the gains or losses on an open investment position that have not yet been realized through the asset’s sale.

It is also known as paper profit or loss because the profits or losses are theoretical until the position is closed.

Understanding Unrealized Gain

When you hold an investment that has appreciated or depreciated, the profit or loss is considered unrealized until you sell the security.

It would represent the potential gain or loss on the investment if it were to be sold at the current market value.

The calculation of unrealized profit or loss is based on the difference between the current value of the investment and its original purchase price.

If the current value exceeds the purchase price, it is an unrealized profit. If the current value is lower, it is an unrealized loss.

Unrealized profit and loss is a key aspect of investment analysis, providing insights into the potential value of an investment at any given time.

However, it is important to remember that unrealized profit and loss is subject to market fluctuations and can change until the investment is sold.