Long and short position

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With long and short position ( English long for: 'long' or 'far' and short for: 'short' or 'close') buy and seller positions are referred to in finance . “Long” or “long position” means the buyer position in a trading contract , and accordingly “short” or “short position” means a seller position.

In general, in the case of financial instruments such as stocks or derivatives , "long" denotes any position in which the holder benefits from an increase in the value of the financial instrument. Accordingly, the holder of a short position - e.g. B. with a short sale - on the falling value of the financial instrument. In the case of derivatives, it is important to note how they are differentiated from the underlying : When characterizing long or short, a distinction must be made as to whether the name refers to the derivative or the underlying.

Transactions that serve to neutralize an open trading position, regardless of whether they are long or short , are referred to as closing out .

In a broader sense, long and short are used analogously for taking a position in any market parameters. The position of a holder of a corporate bond is referred to in this jargon as “short the credit spread ” because the corporate bond loses value when the credit spread widening (widening).

In the case of financial instruments, the value of which depends on several parameters, a distinction must be made as to which parameter the characterization long or short refers to. Such is the position of writer of a put option on a stock

  • generally "short option", because the writer wins money if the option loses value,
  • “Short volatility”, because the option loses value and the writer gains money if the value of the implied volatility determining the price of options declines , and
  • "Long share" because the option loses value and the writer gains money if the value of the underlying share increases.

The price-determining parameters are considered under otherwise identical conditions (see ceteris paribus ).

Individual evidence

  1. ^ Perry Kaufman: A Short Course in Technical Trading , p. 82, John Wiley & Sons, 2003, ISBN 978-0-471-26848-2 .