Unrealized vs realized PnL: what each number means
Unrealized PnL is the profit or loss an open position would show if it were closed at the current reference price; realized PnL is the profit or loss that has actually been booked to your balance by closing all or part of a position. The first moves every tick and is an estimate; the second only changes when you trade, and it is final.
This page is for anyone looking at an exchange’s position panel and trying to work out why the two figures behave the way they do — especially after a partial close, an add to the position, or a fee. It covers how each is computed, a worked example you can follow on paper, and the specific ways the split between them gets misread. (British spelling: unrealised and realised. Same thing.)
Why this matters now
Two reasons the distinction is more than bookkeeping.
Unrealized PnL is live money for margin purposes. On most futures venues, unrealized losses reduce the equity that backs your positions, so they move you toward liquidation before anything has been “realised”. In cross margin, one position’s unrealized loss can eat the margin of another — see isolated vs cross margin.
Realized PnL is the number people report, and it can be managed. You choose when to close. A trader who takes every winner and holds every loser has a realized record that looks excellent and an account that does not. The equity curve article covers what that does to a performance chart; this page covers the arithmetic underneath it.
How it actually works
- Every open position has an average entry price. Futures venues typically track one average per position: total cost of the quantity held, divided by the quantity. Adding to a position changes it; partially closing does not.
- Unrealized PnL marks that position against a reference price. For a long:
(reference − average entry) × quantity. Shorts flip the sign. The reference is usually the mark price, not the last traded price, so a single wick on thin volume does not swing the figure. - Closing moves PnL from one bucket to the other. Close part of the
position and the closed quantity’s share —
closed quantity × (exit − average entry)for a long — becomes realized. The remainder stays unrealized at the same average entry. - Fees and funding are booked as realized when they are charged, on most venues. Exactly when an entry fee lands in the realized figure varies by venue, which is one reason your own numbers and the panel can disagree by the size of a fee.
The formula for the closed portion is the same one in how to calculate futures PnL, and the futures PnL calculator computes it for a full close.
A worked example
Illustrative numbers, a linear contract, and an illustrative fee of 0.05% per side.
Open. Buy 1.0 at 2,000, then add 1.0 at 1,900. Average entry is (2,000 + 1,900) ÷ 2 = 1,950; quantity 2.0. Entry fees total 1.95.
Mark at 1,980. Unrealized PnL = (1,980 − 1,950) × 2.0 = +60. Nothing realized yet except fees.
Close 1.2 at 2,010. Realized gross = (2,010 − 1,950) × 1.2 = +72. Exit fee on 1.2 × 2,010 = 1.206.
- If the venue books the entry fee at open, realized PnL now stands at 72 − 1.95 − 1.206 = +68.84 in total.
- The remaining 0.8 keeps its 1,950 average entry. At a mark of 1,990 it shows unrealized PnL of (1,990 − 1,950) × 0.8 = +32.
Mark falls to 1,920. The remainder now shows −24 unrealized. Realized PnL is still +68.84 — it does not move, because nothing was traded.
The panel is now showing a comfortable realized profit next to a small unrealized loss. The account is up 44.84 net of fees on the whole sequence. That is the only figure that describes what happened, and the panel does not show it directly.
Unrealized vs realized: the confusion that costs money
The pair that gets confused is not the two definitions — it is the idea that an unrealized loss is not a loss yet.
It is a loss with an option attached: the option to wait. Waiting can recover it, or deepen it. What it cannot do is make the current loss not exist; your equity, your margin ratio and your liquidation distance all already reflect it. Holding a losing position to avoid “realizing” the loss is a decision to keep the risk, taken for a reason that has nothing to do with the risk.
The same illusion runs the other way with averaging down. Adding at a lower price lowers the average entry and shrinks the unrealized loss per unit, which feels like progress. It is a larger position in the same drawdown — see averaging down vs DCA.
The split depends on the accounting method
A second confusion: realized PnL is not a physical quantity. It depends on the cost-basis method.
Example (illustrative). Buy 1 unit at 100, another at 120, sell 1 at 130, with the remaining unit marked at 130:
| Method | Realized | Unrealized | Total |
|---|---|---|---|
| Average cost | 20 | 20 | 40 |
| FIFO | 30 | 10 | 40 |
| LIFO | 10 | 30 | 40 |
The total never changes. Only the split does. Futures positions on a netting venue are generally tracked at average cost, while your own journal, a portfolio tracker or a tax report may use FIFO. That is a common reason a reconciliation of realized PnL fails while positions match perfectly. Which method applies for tax is a jurisdiction question this page does not cover.
Where the boundary should sit
Judge performance on total PnL, marked to market. Realized plus unrealized, net of fees and funding. Anything else lets the timing of your exits decide how good the record looks.
Measure risk limits against equity, not realized PnL. A daily loss limit that counts only closed trades can be avoided entirely by not closing. The limit should trigger on mark-to-market equity.
Know which price your venue marks with. If it uses mark price and you compute from last price, your unrealized figure will differ during fast moves. In the example above, a last price of 1,975 against a mark of 1,990 is 20 versus 32 on the remaining 0.8.
Record both at close. In your trading journal, log realized PnL per close and the running average entry, so a partial close can be reconstructed later.
FAQ
What is the difference between unrealized and realized PnL?
Unrealized PnL is the profit or loss an open position would show if closed at the current reference price, usually the mark price. Realized PnL is the profit or loss already booked to your balance by closing all or part of a position, including fees. Unrealized changes with every price move; realized only changes when you trade or are charged a fee or funding.
Does unrealized PnL affect my margin?
On most futures venues, yes. Unrealized losses reduce the equity backing your positions, which moves you toward liquidation before anything has been closed. In cross margin, an unrealized loss on one position can consume margin that supports another.
Why did my realized PnL not change when I partially closed at a profit?
It should have increased by the closed quantity times the difference between the exit price and the average entry, minus the exit fee. If it barely moved, check whether fees or funding booked in the same period offset it, and whether an earlier add changed the average entry price more than you expected.
Is an unrealized loss a real loss?
It is a real reduction in equity, margin and account value right now. What stays open is the option to wait, which can recover the loss or deepen it. Treating it as not yet real is how losing positions get held for reasons unrelated to their risk.