What are long and short positions in the market?

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What are long and short positions in the market?

You must have heard about long and short positions in the market. Do you know what exactly these terms mean? And how different are they from each other?

In the market, if you own shares of a company and expect it to rise, it is considered a long position. But if you are bearish about their future and sell them even before they are transferred in your name, it is called a short position. Typically, when an investor shorts a stock, he borrows the share in a margin account from a brokerage firm and sells them.

Having said that, long and short positions are mostly related to the derivatives or Futures & Options segment, where the trading happens in the present for future delivery of shares.

So, your trade in the F&O segment is accordingly termed as long or short.

When you as a trader buy a future contract of any index or stock in anticipation of a price rise in the future, you are said to have built a long position.

On the other hand, when you as a trader sell a future contract of any index or stock in anticipation of a price drop in the future, you are said to have built a short position.

In Future and Options, you choose Calls or Sell when you are bullish about a stock or index and expect the price to rise in future. So in a long position, investors chose the Call option.

And those opting for a short position select the Put option. A Put option in the Future and Options segment is opted when the investor is not bearish about any stock.

So more long positions in the market suggest that the outlook is optimistic, and people expect the indices to go up. While a rise in short positions means that the feeling is bearish.