Unrealized Profit and Loss

Unrealized profit and loss (P&L) is the gain or loss on open positions that has not yet been closed or settled. It reflects current market valuations rather than actual cash outcomes.

For example, an oil trader holding a long WTI futures contract sees unrealized P&L fluctuate daily as market prices change. Once the position is closed, the P&L becomes realized.

Unrealized P&L is critical for performance measurement, risk management, and margin requirements. It informs decision-making for hedging, position adjustments, and portfolio allocation.

Monitoring unrealized P&L allows traders to track exposure, evaluate strategies, and anticipate potential financial impacts before positions are closed, ensuring informed trading and risk control.