Daily PnL Realization

Daily PnL Realization is the accounting process of converting the unrealized gains or losses from open trading positions into realized cash or balance changes at the end of a trading session. In the context of derivatives and cryptocurrency exchanges, this often involves the mark-to-market mechanism where the value of a position is adjusted to the current settlement price.

By realizing PnL daily, exchanges ensure that margin accounts accurately reflect the trader's equity, which is crucial for managing counterparty risk. This practice prevents the accumulation of large, uncollateralized losses that could threaten the solvency of the trading venue.

For the trader, it represents the actual profit or loss locked into their account balance, distinct from the fluctuating paper value of an open trade. It serves as a vital checkpoint for risk management and capital allocation.