Resolution is the process of determining which outcome of a market actually occurred, after which the winning shares become redeemable for $1.00 each and the losing shares become worthless. Until a market resolves, positions are open exposure rather than realised profit or loss.
Two things commonly go wrong in analysis here. The first is treating an unresolved position as though it were closed. The second is failing to retire capital at resolution — a losing position's cost basis stops being capital at risk the moment the market settles, and carrying it forward overstates exposure dramatically for anyone who holds to expiry.
Two of them. Counting an open position as realised profit, and never retiring a losing position's cost basis once the market settles — the second dramatically overstates capital at risk for anything held to expiry.
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