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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 assetsEdit
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 (but with options the situation is more complicated).
- When a trader buys an option contract that he is not short, he is said to be opening a long position.
- When a trader sells an option contract that he is already long, he is said to be closing a long position.
- When a trader sells an option contract that he is not long, he is said to be opening a short position.
- When a trader buys an option contract that he is already short, he is said to be closing a short position.
Net position is the difference between total open long (receivable) and open short (payable) positions in a given asset (security, foreign exchange currency, commodity, etc.) 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.