The p&l of trades (and cash flows) is described as:
Unrealized - delivery has not yet taken place, the value of the trade is determined by MtM, and the p&l varies each day with the marketcurve
Realized - delivery has taken place, the value of the deliveredcommodity is no longer relevant, and there is no uncertainty about the value of the trade
Detail
Most trades involve delivery at some point in the future
Because the value of the commodity to be delivered is not known before the delivery, the value needs to be estimated or calculated from market data.
For options and other non-linear trades the value may be calculated using the Black 76 method (derived from the earlier Black-Scholes method)
We say the trade's value (its p&l) is unrealized because it is not yet known for certain, and is therefore a cause of market risk
Once delivery has taken place, we know (or don't care about) the delivered value, the value of he trade is known and no longer varies. In effect the p&l is locked in, there is no more market risk associated with this trade and the p&l isĀ said to be realized
The p&l of a trade (or cash flow) moves from unrealized to realized when one or more of the following conditions has been met