Position (finance)


In finance, a position is the amount of a particular security, commodity or currency held or owned by a person or entity.
In financial trading, a position in a futures contract 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

In derivatives trading or for financial instruments, the concept of a position is used extensively. There are two basic types of position: a long and a short. Generally speaking, long positions stand to gain from a rise of the price of the instrument and short positions from a fall.
Options will be used in the following explanations. The same principle applies for futures and other securities. 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 long 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 and open short positions in a given asset held by an individual. This also refers to the amount of assets held by a person, firm, or financial institution, as well as the ownership status of a person's or institution's investments.