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Finance GlossaryPaper Profit/Loss
Paper Profit/Loss
Definition of Paper Profit/Loss
Paper profit or loss ( Unrealised profit or loss) is the profit or loss on an investment that has not been converted into actual cash. Paper profit occurs when the current market value of a security is higher than its purchase price while when the current market value of a security is less than its purchase price, it is paper loss. The profit or loss is only realised when the investor sells the security, thus it is also called paper trading and virtual trading. Indian tax laws don't tax profits on paper until realised through sale.
Related Terms
Cash Flow
The cash flow describes the amount of money that moves in or out of a company or an individual’s pocket. Cash flow can be of two types:
- Positive cash flow: more money earned than spent
-
Negative cash flow: more money spent than earned
Cash flow is an important metric in finance because it helps calculate metrics like liquidity, cash conversion ratio, and others along with giving a broad overview of a company’s financial health.
Bear Market
A bear market is a period of continuous decline in the stock or commodity market.
Typically, investors believe that a bear market has arrived when a stock, commodity, or entire index fall by 20% or more from its most recent highs.
The onset of a bear market is generally in tandem with poor economic conditions.
Typically, investors believe that a bear market has arrived when a stock, commodity, or entire index fall by 20% or more from its most recent highs.
The onset of a bear market is generally in tandem with poor economic conditions.
Option Chain
An Option Chain is the complete list of all the options contracts, both calls and puts, for a given underlying security, across a wide range of expiration dates and strike prices. It shows real-time data of bid price and ask price, trading volume, and open interest for each contract. Traders use the option chain to analyse market depth and identify where the most trading activity is concentrated (often suggesting potential support and resistance levels).
Unsystematic Risk
Unsystematic risk is the risk specific to a company or industry and not the overall market. It includes factors such as management decisions, labour strikes, or product failures. For example, a lawsuit affecting only one pharmaceutical company represents unsystematic risk and can be reduced through diversification.
Negative Correlation
Negative Correlation describes a relationship between two assets where they move in opposite directions. When one increases in value, the other tends to decrease. In finance, it is often used to reduce portfolio risk by combining assets that do not move together. An example is gold and equity market.
Yield
Yield is the income generated from an investment, expressed as a percentage of its price or value. For example, a bond paying ₹50 annually on a ₹1,000 investment offers a 5% yield, helping investors compare income potential across different assets like bonds, dividends, or fixed deposits.
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