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Unrealized P/L and Floating P/L
Unrealized P/L
– Unrealized P/L represents the profit or loss that would be realized if you closed all your open positions immediately.
– It is the current value of your open positions based on the latest market prices.
– This value is constantly changing as the prices of your open positions fluctuate.
– Unrealized P/L is considered “unrealized” because you have not yet closed the positions and locked in the gains or losses.
Floating P/L
– Floating P/L is another term used interchangeably with Unrealized P/L.
– It refers to the same concept – the profit or loss of your open positions that is not yet realized.
– The term “floating” indicates that this P/L value is constantly changing or “floating” as the market prices of your open positions move up or down.
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For example, let’s say you bought 100 shares of a stock at $10 per share. If the current market price of the stock is $12 per share, your Unrealized or Floating P/L would be a profit of $200 (100 shares x $2 price difference). This profit is “unrealized” because you have not yet sold the shares and locked in the gains.
If the stock price then falls to $9 per share, your Unrealized or Floating P/L would become a loss of $100 (100 shares x $1 price difference). This loss is still “unrealized” until you close the position.
Unrealized P/L Example:
Let’s say you bought 100 shares of ABC stock at $10 per share. Your total investment was $1,000 (100 shares x $10 per share).
Now, if the current market price of ABC stock is $12 per share, your Unrealized P/L would be a profit of $200:
Current market value of your 100 shares: 100 x $12 = $1,200
Your original cost: 100 x $10 = $1,000
Unrealized P/L = $1,200 – $1,000 = $200 (profit)
This $200 profit is “unrealized” because you have not yet sold the shares and locked in the gains.
Floating P/L Example:
If the price of ABC stock then falls to $9 per share, your Unrealized or Floating P/L would become a loss of $100:
Current market value of your 100 shares: 100 x $9 = $900
Your original cost: 100 x $10 = $1,000
Unrealized P/L = $900 – $1,000 = -$100 (loss)
This $100 loss is still “unrealized” until you close the position by selling the shares.
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