finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...

, a position is the amount of a particular

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 ...

commodity In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a comm ...

currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" 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 def ...

held or owned by a person or entity. In

financial trading A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial market ...

, a position in a

futures contract In finance, a futures contract (sometimes called a 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 asset ...

does not reflect ownership but rather a binding commitment to buy or sell a given number of financial instruments, such as securities, currencies or commodities, for a given price.

Trading and financial assets

derivatives trading In finance, a derivative is a contract that ''derives'' its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate, and is often simply called the "underlying". Derivatives can be u ...

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 Short may refer to: Places * Short (crater), a lunar impact crater on the near side of the Moon * Short, Mississippi, an unincorporated community * Short, Oklahoma, a census-designated place People * Short (surname) * List of people known as ...

'' (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 * ''Futures'' (magazine), an American finance magazine Music * ''Futures'' (album), a ...

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 he is not short, he is said to be ''opening'' a

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

Short position

*When a trader ''sells'' an option contract that he is not long, he is said to be ''opening'' a

position. *When a trader ''buys'' an option contract that he is already short, he is 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 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 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 people, whether Natural person, natural, Legal person, legal or a mixture of both, with a specific objective. Company members share a common p ...

, or

financial institution Financial institutions, sometimes called banking institutions, are business entities that provide services as intermediaries for different types of financial monetary transactions. Broadly speaking, there are three major types of financial inst ...

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

References

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