The profit and loss of open positions is shown as the total unrealized P/L and realized P/L and is calculated using the position's sell price and average cost.
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Unrealized P/L: Refers to the profit or loss on an open position if it were closed at the current market price.
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Realized P/L: Refers to the actual profit or loss that is made when shares are sold or a position is closed.
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Transactions Fees: All fees related to buying or selling stock, or maintenance and storage fees.
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Definition
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Formula
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Unrealized Profit & Loss (P/L)
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Unrealized P/L = (Current Price – Average Cost) * Total Quantity of Shares
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Realized Profit & Loss (P/L)
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Realized P/L = (Previous Realized P/L) + ((Sell Price – Average Cost) * Sell Qty) – Transaction Fees
Note: If there is no previous realized P/L, the amount is 0
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Profit & Loss (P/L)
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P/L = Unrealized P/L + Realized P/L
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Example 1: Opening a position
Before the transaction day (Day T), you held no position in Alibaba (BABA). On Day T, you bought 200 shares of BABA at $200 per share with $10 in transaction fees, and the current closing price was $205.
Then the average cost of the opened position is as follows:
Average Cost = ((Previous Average Cost * Previous Qty) + (Purchase Price * Purchase Qty) + Transaction Fees) / Total Qty
= (($200 * 200) + $10) / 200
= $200.05
| Average Cost |
Current Price |
Quantity |
Position P/L |
Unrealized P/L |
Realized P/L |
| 200.05 |
205 |
200 |
990 |
990 |
0 |
Example 1 (Continued): Selling some shares
On the day after the transaction day (Day T+1), you sold 100 shares at $210 per share with $10 in transaction fees, and the new current closing price was $215.
The average cost remains the same as no new shares were purchased. However, the profit and loss of open positions is updated:
Average Cost = $200.05
Realized P/L = (($210 – $200.05) * 100) – $10 = $985
| Average Cost |
Current Price |
Quantity |
Position P/L |
Unrealized P/L |
Realized P/L |
| 200.05 |
215 |
100 |
2480 |
1495 |
985 |
Example 1 (Continued): Buying more shares
Five days after the transaction day (Day T+5), you bought another 100 shares at $205 per share with $10 in transaction fees, and the new current closing price was $215.
The average cost is updated based on the purchase of more shares at the new purchase price:
Average Cost = ((Previous Average Cost * Previous Qty) + (Purchase Price * Purchase Qty) + Transaction Fees) / Total Qty
Average Cost = (($200.05 * 100) + ($205 * 100) + $10) / 200 = $202.575
| Average Cost |
Current Price |
Quantity |
Position P/L |
Unrealized P/L |
Realized P/L |
| 202.575 |
215 |
200 |
3470 |
2485 |
985 |