paper profit

noun
Updated on: 13 Oct 2017

Definition of paper profit

:a profit that can be realized only by selling something (such as a security) that has appreciated in market value

First Known Use of paper profit

1893


Financial Definition of PAPER PROFIT

paper profit

What It Is

Paper profit refers to the amount you would gain on a security if it were sold.

How It Works

Also called book profit, paper profit is the not-yet-realized amount gained on a security based on the spread between its current market price and its original purchase price.

For instance, if a bond were purchased at $600 and the current market price is $1,200, the paper profit would be $600 ($1,200 - $600 = $600).

Why It Matters

The paper profit on a held security can be calculated at any point. This can be helpful to investors as they consider selling certain assets as part of their portfolio strategy.

It's very important to note that a paper profit only turns into a realized profit when you actually sell the security.

When making a decision on your potential profit or loss, it's important to consider any fees or taxes you may incur as a result of selling.


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