Long Position (Long)
Candlefocus EditorIn the options market, being long an asset can mean two different things. The first is outright ownership of the underlying asset, such as stocks and bonds. The second is the ownership of an option on the asset. An option is a contract that gives the holder the right to buy or sell an asset at a set price. If the issuer of the option is the holder of the asset, then they are “long” the asset.
When measuring the time factor of a long position in stocks or bonds, it simply means the holder of the asset does not intend to reduce or sell the asset for a given amount of time. The investment is made with the intention of either keeping it until it increases in value, or until the investor is presented with an opportunity to sell the asset at a pre-determined price that presents a positive return.
As stated in the definition, a long position is the opposite of a short position. A short position is the selling of an asset that the investor does not currently own. This is done with the expectation that the asset’s price will decrease, allowing the investor to buy back the asset at a lower price and pocket the difference. A long position is typically used to take advantage of the appreciation of an asset’s value while a short position is used to take advantage of a decline in an asset’s price.
When it comes to investing, taking a long position allows an investor to benefit from an increase in the value of an asset. It is important to remember that even though a long position may be taken with the assumption of a positive return, there is always the potential for a loss. It is important for investors to understand the risks associated with any investment before taking a long position.