Long position
Family VII · Market & styles
Not to be confused with short position, position trading, going long.
Long position is a directional exposure that profits from a rise in the price of an underlying asset. It is the opposite of a short position, which profits from a decline. A long position can be held in spot markets, futures, options, or other instruments, and its value changes with the price of the underlying.
How a long position works
A long position is established when a trader buys an asset or enters a derivative contract that gains value as the underlying price increases. In spot markets, the buyer owns the asset outright and profits if the price later rises above the purchase price. In derivatives, the long holder does not own the underlying but holds a contract whose value is tied to it. The position can be closed by selling the asset or offsetting the contract.
Worked example
Suppose a trader buys 100 shares of a company at $50 per share, establishing a long position. The total cost is $5,000, excluding commissions and fees, which vary by broker.
Long positions in different instruments
In futures and options, a long position is a contractual right or obligation to buy the underlying at a specified price. For options, the long holder pays a premium and has the right but not the obligation to exercise. For futures, the long holder is obligated to buy at contract expiry unless the position is closed earlier. The mechanics and risks differ, but the directional exposure is the same: value rises when the underlying price rises.
Often confused with
- short position
- A short position profits when the underlying price falls, whereas a long position profits when it rises; the visible sign is the direction of the profit and loss relative to price movement.
- position trading
- Position trading is a strategy of holding trades for weeks to months, while a long position is a directional exposure that can be held for any duration; the visible sign is that position trading describes a holding period, not a direction.
- going long
- Going long is the act of establishing a long position, whereas a long position is the state of holding that exposure; the visible sign is that going long is an action, while a long position is a holding.