Is unrealized PnL taxable?

In most countries, unrealized PnL is not taxable. You only owe taxes when you close a position and realize the profit or loss. Tax rules vary by jurisdiction.

Does unrealized PnL affect my margin?

Yes. Unrealized losses reduce your available margin and can trigger liquidation. Unrealized profits increase your available margin in cross margin mode.

Can unrealized PnL disappear?

Yes. Unrealized PnL fluctuates with the market. A profit can turn into a loss and vice versa. Only closing the position locks in (realizes) the PnL.

Unrealized PnL — Margin Trading Definition

Unrealized PnL (Profit and Loss), also called "paper profit/loss" or "floating P&L," represents the current profit or loss on an open position based on the current mark price. It becomes realized PnL only when you close the position.

Calculating Unrealized PnL

For Long Positions:

Unrealized PnL = (Mark Price - Entry Price) × Position Size

For Short Positions:

Unrealized PnL = (Entry Price - Mark Price) × Position Size

Example (Long):

Entry price: $50,000
Current mark price: $52,000
Position size: 1 BTC
Unrealized PnL = ($52,000 - $50,000) × 1 = +$2,000

Example (Short):

Entry price: $50,000
Current mark price: $48,000
Position size: 1 BTC
Unrealized PnL = ($50,000 - $48,000) × 1 = +$2,000

Unrealized PnL and Margin

Your unrealized PnL directly affects your:

Available margin: Profits increase it, losses decrease it
Margin ratio: Determines how close you are to liquidation
Liquidation price: Based on when unrealized losses exceed your margin

In cross margin mode, unrealized profits from one position can help maintain margin on another losing position.

ROI vs Unrealized PnL

ROI (Return on Investment) considers your leverage:

Unrealized PnL: +$2,000
Initial margin (10x leverage on $50,000 position): $5,000
ROI: $2,000 / $5,000 = 40%

A 4% price move with 10x leverage gives you a 40% ROI — this shows why leverage amplifies both gains and losses.

Tax Implications

In most jurisdictions, unrealized PnL is not taxable — you only owe taxes on realized gains (when you close the position). However, tax rules vary by country. Consult a tax professional for your specific situation.

Unrealized PnL