What does position mean in stock trading

Stocks: “Going Short” and what it's all about

When investors “go short” on stocks, they speculate on falling prices.

For example, these investors sell stocks that you don't even have.

In this way, you carry out so-called short sales or buy put options (leverage certificates that gain in value when the underlying asset falls).

Selling a security short is called a “short position”.

In futures trading, this is the sale by a trader speculating on falling prices.

At the time of the transaction, there is a special feature that the trader does not own the corresponding stocks or securities.

Thus, at the time of fulfillment, he speculates on being able to purchase these papers under the actual course.

The statement “go short” basically expresses the fact in every trade that the trading shareholder benefits from falling prices for the trader.

Often short positions are also created through derivative financial instruments.

The short position describes a seller position in the financial world.

Stocks: “going short” vs. “going long” and what the differences are

With “long” and “short” not only buyer but also seller positions are referred to.

The term “long” or “long position” describes the buyer position in a trade. Accordingly, “short” or “short position”, as already mentioned, denotes a seller position.

In the case of financial instruments such as stocks or derivatives, each position is generally referred to as "long" in which the holder benefits from an increase in the value of the financial instrument.

The holder of a short position speculates accordingly - for example with a short sale - on the falling value of the financial instrument.

In the case of derivatives, however, the distinction to the underlying must be observed. In general, when characterizing “long” or “short”, a distinction must be made as to whether the name refers to the derivative or the underlying.

“Closing out” is also used to describe transactions that serve to neutralize an open trading option, regardless of whether they are “long” or “short”.

Shares: “short” and “long” in the broader sense

The terms “long” and “short” are used in the broader sense for taking a position in any market parameter.

So the position of a corporate bond holder is called “short the credit spread”.

This can be explained by the fact that the corporate bond loses value if the credt spread is widened or widened.

If the value of financial instruments depends on several parameters, a distinction must be made as to which parameter the characterization “long” or “short” refers to.

The position of a writer of a put option is generally "short option" on a share because the writer wins money if the option loses value and "long share" because the option loses value and the writer gains money, when the value of the underlying stock increases.

With the right strategy, money can be made in option transactions, but the risk of the writer should not be underestimated. > read more


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