In financial trading, a position is a binding commitment to buy or sell a given amount of financial instruments, such as securities, currencies or commodities, for a given price.

The term "position" is also used in the context of finance

Finance

"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...

 for the amount of securities or commodities held by a person, firm, or institution, and for the ownership status of a person's or institution's investments.

Trading and financial assets

In derivatives trading

Derivative (finance)

A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.Under U.S...

 or for financial instruments, the concept of a position is used heavily. There are two basic types of position: a long and a short.

Traded options

Option (finance)

In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the...

 will be used in the following explanations. The same principle applies for futures

Futures contract

In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...

 and other securities

Security (finance)

A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...

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

Long

Long (finance)

In finance, a long position in a security, such as a stock or a bond, or equivalently to be long in a security, means the holder of the position owns the security and will profit if the price of the security goes up. Going long is the more conventional practice of investing and is contrasted with...

 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.
• When a trader is 'long', he/she wins when the price increases, and loses when the price decreases.

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.
• When a trader is 'short', he/she wins when the price decreases, and loses when the price increases.

The long and the short of it is that: buyers are referred to as the long; and sellers are referred to as the short.

Net position

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

Currency

In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...

, commodity

Commodity

In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services....

, etc...) held by an individual. This also refers the amount of assets held by a person, firm, or financial institution

Financial institution

In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...

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

See also

• Long (finance)
  Long (finance)
  In finance, a long position in a security, such as a stock or a bond, or equivalently to be long in a security, means the holder of the position owns the security and will profit if the price of the security goes up. Going long is the more conventional practice of investing and is contrasted with...
  
  
• Short (finance)