What is Paper Profit?

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

How Does Paper Profit Work?

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 Does Paper Profit Matter?

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.