In finance, a long
position
Position often refers to:
* Position (geometry), the spatial location (rather than orientation) of an entity
* Position, a job or occupation
Position may also refer to:
Games and recreation
* Position (poker), location relative to the dealer
* ...
in a
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 ...
means the holder of the position owns a positive amount of the instrument. The holder of the position has the expectation that the financial instrument will increase in value.
This is known as a
bullish position.
Security
In terms of a
security
Security is protection from, or resilience against, potential harm (or other unwanted coercive change) caused by others, by restraining the freedom of others to act. Beneficiaries (technically referents) of security may be of persons and social ...
, such as a
stock
In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a company ...
or a
bond, or equivalently ''to be long'' in a security, means the holder of the position owns the security, on the expectation that the security will increase in value, and will profit if the price of the security goes up. ''Going long''
a security is the more conventional practice of
investing.
Future
Going long in a
future
The future is the time after the past and present. Its arrival is considered inevitable due to the existence of time and the laws of physics. Due to the apparent nature of reality and the unavoidability of the future, everything that currently ...
means the holder of the position is obliged to buy the underlying instrument at the contract price at expiry.
The holder of the position will profit if the price of the underlying instrument goes up, as the price he will pay will be less than the market price.
Option
An
options
Option or Options may refer to:
Computing
*Option key, a key on Apple computer keyboards
*Option type, a polymorphic data type in programming languages
* Command-line option, an optional parameter to a command
*OPTIONS, an HTTP request method
...
investor goes long in an underlying investment (in technical jargon, the preposition "in" is omitted) by buying
call option
In finance, a call option, often simply labeled a "call", is a contract between the buyer and the seller of the call option to exchange a security at a set price. The buyer of the call option has the right, but not the obligation, to buy an ...
s or selling
put option
In finance, a put or put option is a derivative instrument in financial markets that gives the holder (i.e. the purchaser of the put option) the right to sell an asset (the ''underlying''), at a specified price (the ''strike''), by (or at) a s ...
s on it. This is different from going long by buying the underlying or trading in futures, because a long position in an option does not necessarily mean that the holder will profit if the price of the underlying instrument goes up. Going long in an option gives the right (but not obligation) for the holder to exercise it.
If the price rises to above the
strike price, the owner of a call option will probably exercise the option to buy the instrument and (at least on paper) will gain if the difference between the price at that time and the strike price is greater than the premium which he paid. With a put option on the other hand, the seller of the option will profit (on paper) if the price of the instrument goes up (so that the option is not exercised by the buyer), or falls by less than what he received as a premium.
See also
*
Short (finance)
*
Position (finance)
References
{{DEFAULTSORT:Long (Finance)
Financial markets
Securities (finance)
Stock market terminology