When the company stock you own is worth more (or less) than what you paid for it, the capital gain (or loss) is considered unrealized, or “just on paper.” If you sell some of your stock, you permanently lock in the trading price at the prevailing fair market value, creating a realized gain or loss. Generally, only realized gains/losses represent actual money being gained or lost, with actual tax ramifications. Because stock options are merely the right to buy stock, not actual stock, their value is inherently unrealized, essentially worthless until you exercise them.
