POSITION (FINANCE)

In finance, a 'position' may be:

★ A commitment to buy or sell a given amount of securities or commodities;

★ The amount of securities or commodities held by a person, firm, or institution; or

★ The ownership status of a person's or institution's investments.

Contents

Derivatives trading

Long position

Short position

See also

Derivatives trading

In derivatives trading, the concept of a ''position'' is used heavily. There are two basic types of position: a ''long'' and a ''short''.
Traded options will be used in the following explanations. The same principle applies for futures and other securities. For simplicity, only one contract is being traded in these examples.

Long position

★ When a trader ''buys'' an option contract that he has not already written (i.e. sold), he is said to be ''opening'' a long position.

★ When a trader ''sells'' an option contract that he already owns, he is said to be ''closing'' a long position.

Short position

★ When a trader ''writes'' (i.e. ''sells'') an option contract that he does not already own, he is said to be ''opening'' a short position.

★ When a trader ''buys'' an option contract that he has written (i.e. sold), he is said to be ''closing'' a short position.
The long and the short of it is that: buyers are referred to as ''the long''; and sellers are referred to as ''the short''.

See also

★ Long (finance)

★ Short (finance)