Measuring performance
Realised profit and loss
Also called Realised P&L
Gains and losses that have been locked in by selling, as opposed to those still on paper.
How it works
Realised P&L is sale proceeds minus the cost basis of what you sold, minus costs. It is the figure tax is normally assessed on.
Which basis that is depends on the method. Lot-based systems use the cost of the particular lot sold. Pooled and average-cost systems, which some jurisdictions require, use one blended basis for the whole position, so no single purchase has a gain of its own. Olnest is one of the pooled systems: a further buy re-averages a single basis for the whole position, and a sale realises against that average.
Keeping it separate from unrealised P&L matters because they behave differently: one is a completed fact, the other is a current opinion of the market.
Related terms
- Unrealised profit and lossThe gain or loss on holdings you still own, based on today’s price.
- Cost basisWhat you actually paid for a holding, including fees — the number every gain or loss is measured from.
- Tax lotOne purchase of a security, tracked separately with its own date and price.
- Average costTreating all purchases of one security as a single pooled holding at a blended price.
- FIFO and other lot methodsThe rule deciding which purchase you are treated as having sold, when you own several.
- Capital gainThe profit made when you sell something for more than you paid for it.
Mentioned in
More in Measuring performance
- Risk-free rate
- Real return
- Sharpe ratio
- Price return
- Sortino ratio
- Performance attribution
- Survivorship bias
- Overfitting
All 29 Measuring performance terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.