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. The term "long position" is often used in context of buying options contracts.

Ownership

When an investor holds a long position in a stock they are buying a share of ownership in a company. Depending on the type of Stock purchased this can entitle the shareholder to voting rights at shareholder meetings or dividend payments.

Security

In terms of a

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 ...

, such as a

stock Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the Share (finance), shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporatio ...

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 Investment is traditionally defined as the "commitment of resources into something expected to gain value over time". If an investment involves money, then it can be defined as a "commitment of money to receive more money later". From a broade ...

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 ex ...

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 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 (finance), option to exchange a Security (finance), security at a set price. The buyer of the call option has the righ ...

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 on) a ...

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 In finance, the strike price (or exercise price) of an option is a fixed price at which the owner of the option can buy (in the case of a call), or sell (in the case of a put), the underlying security or commodity. The strike price may be set ...

, 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.

Strategy

* The buy-and-hold

investment strategy In finance, an investment strategy is a set of rules, behaviors or procedures, designed to guide an investor's selection of an investment portfolio. Individuals have different profit objectives, and their individual skills make different tactics ...

: a long term passive strategy that makes use of a long position by a shareholder purchasing a stock and holding it for a long period of time, regardless of fluctuations in the market.

References