An unrealized position remains open, so its displayed value can change before the outcome is final. The apparent gain or loss is calculated from a current market price, model estimate or provisional settlement value.
Reporting unrealized results alongside settled results can obscure how much profit has actually been locked in. Clear performance reporting separates realized outcomes, open exposure, capital at risk, fees and the assumptions used to value unresolved positions.
A position may move against the holder before it closes, and some contracts have specific resolution or liquidity constraints. Treating an unrealized gain as certain can therefore overstate performance.
ELI5
An unrealized position is a trade that is still open. A screen may show that it is ahead or behind, but the final result can still change.
For example, a contract may look profitable today while it is waiting for official settlement. The gain becomes realized only when the position is closed or the contract is finally resolved.
