Long Stock Position

A long stock position is one in which the trader has an interest in the price of the security increasing.  This means that the trader either bought actual shares of the security, bought call options for the security, sold put options for the security, holds warrants to purchase shares which would result in an increase in value of the warrants if the price rises, or holds a derivative or ETF position in which the position’s value will increase if the underlying security rises in price.

A trader may take a long position for multiple reasons.  He may believe that the company has good growth prospects and believes the price will rise, he may believe the industry or sector has good prospects and is taking a position in multiple securities, he may believe that the recent price action indicates that the price will rise in the near future, or he may be holding a position to collect the dividend or fixed income yield associated with the security, or he could even be using the security as a store of value.

A long position will always rise in value when the price of the security increases.  A long position may be held anywhere from seconds to years. Traders as diverse as high frequency algorithms to mutual fund investors take long positions.

The opposite of a long position is known as a short position.  This is a position from which the value of the position rises if the price of the security falls.

In the United States markets traders may take both long and short positions, but in some markets such as the Chinese Market, traders are only allowed to hold long positions.

Daniel Major

B.S. Degree in Economics and Finance. Professional day trader. Live and work in Manhattan, NY, NY.

Page Updated: March 12, 2013

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