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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.
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 short of it is that: buyers are referred to as the long; and sellers are referred to as the short.
See also
"Position (finance)"