finance Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...

, a position is the amount of a particular

security Security is protection from, or resilience against, potential harm (or other unwanted coercion). Beneficiaries (technically referents) of security may be persons and social groups, objects and institutions, ecosystems, or any other entity or ...

commodity In economics, a commodity is an economic goods, good, usually a resource, that specifically has full or substantial fungibility: that is, the Market (economics), market treats instances of the good as equivalent or nearly so with no regard to w ...

currency A currency is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general definition is that a currency is a ''system of money'' in common use within a specific envi ...

held or owned by a person or entity. In financial trading, a position in a

futures contract In finance, a futures contract (sometimes called futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The item tr ...

does not reflect ownership but rather a binding commitment to buy or sell a given number of

financial instrument Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. They can be cash (currency), evidence of an ownership, interest in an entity or a contractual right to receive or deliver in the form ...

s, such as securities, currencies or commodities, for a given price.

Trading and financial assets

In derivatives trading or for financial instruments, the concept of a ''position'' is used extensively. There are two basic types of position: a ''

long Long may refer to: Measurement * Long, characteristic of something of great duration * Long, characteristic of something of great length * Longitude (abbreviation: long.), a geographic coordinate * Longa (music), note value in early music mens ...

'' (holding a positive amount of the instrument) and a '' short'' (holding a negative amount of the instrument). Generally speaking, long positions stand to gain from a rise of the price of the instrument and short positions from a fall (but with options the situation is more complicated). Options will be used in the following explanations. The same principle applies for

futures Futures may mean: Finance *Futures contract, a tradable financial derivatives contract *Futures exchange, a financial market where futures contracts are traded *''Modern Trader'', formerly Futures, an American finance magazine Music * ''Futures' ...

and other

securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...

. For simplicity, only one contract is being traded in these examples.

Long position

*When a trader ''buys'' an option contract that they are not short, they are said to be ''opening'' a

position. *When a trader ''sells'' an option contract that they are already long, they are said to be ''closing'' a long position.

Short position

*When a trader ''sells'' an option contract that they are not long, they are said to be ''opening'' a short position. *When a trader ''buys'' an option contract that they are already short, they are said to be ''closing'' a short position.

Bull position

A trader holding a bull position will benefit when the price of the underlying goes up. This is equivalent to holding a long position on most financial instruments, but also a short position on put options, inverse ETFs or similar.

Bear position

A trader holding a bear position will benefit when the price of the underlying goes down. This is equivalent to holding a short position on most financial instruments, but also a long position on put options, inverse ETFs or similar.

Net position

Net position is the difference between total open long (receivable) and open short (payable) positions in a given asset (security, foreign exchange

, etc.) held by an individual. This also refers to the amount of assets held by a person,

firm A company, abbreviated as co., is a Legal personality, legal entity representing an association of legal people, whether Natural person, natural, Juridical person, juridical or a mixture of both, with a specific objective. Company members ...

, or

financial institution A financial institution, sometimes called a banking institution, is a business entity that provides service as an intermediary for different types of financial monetary transactions. Broadly speaking, there are three major types of financial ins ...

, as well as the ownership status of a person's or institution's investments.

References

{{DEFAULTSORT:Position (Finance) Derivatives (finance) Financial markets