Aaron Hugh Braun
You may have heard or read the following statements regarding the stock market: "go long" or "go short" or "... open XY long / short position" .
But many newcomers who are not familiar with the stock market and ask Aaron Hugh Braun: What is meant by that? What's up with this long and short? I'll try to give it an understandable definition:
In the financial world, long / short-equity are buyer or seller designated positions. By "long" or "long equity" is meant the buyer position in a trade, and accordingly "short" or "short equity" means a seller position.
In general, financial instruments, such as stocks or derivatives, are longs for any position in which the holder benefits from an increase in the value of the financial instrument. Accordingly, the owner of a short position speculates - with a short sale - on the falling value of the financial instrument. In the case of derivatives, it is important to note the differentiation to the underlying: When characterizing with long or short, a distinction must be made as to whether the name refers to the derivative or to the underlying.
Transactions that serve to neutralize an open trade position, whether long or short, are referred to as a closeout, explains Aaron Hugh Braun.
In a broader sense, Long and Short are used analogously for position taking in any market parameters. For example, the position of a corporate bondholder in this jargon is called a "short credit spread " because the corporate bond loses value as the credit spread expands (increases).
For financial instruments whose value depends on several parameters, a distinction must be made between the parameters to which the long or short characterization refers. So is the position of a writer of a put option on a stock
generally "short option", because the writer gains money if the option loses value,
"Short volatility" because the option loses value and the writer loses money when the value of the options pricing implied volatility declines, and
"Long Share" because the option loses value and the writer gains money as the value of the underlying stock rises.
The price-determining parameters are considered under otherwise identical conditions.
But many newcomers who are not familiar with the stock market and ask Aaron Hugh Braun: What is meant by that? What's up with this long and short? I'll try to give it an understandable definition:
In the financial world, long / short-equity are buyer or seller designated positions. By "long" or "long equity" is meant the buyer position in a trade, and accordingly "short" or "short equity" means a seller position.
In general, financial instruments, such as stocks or derivatives, are longs for any position in which the holder benefits from an increase in the value of the financial instrument. Accordingly, the owner of a short position speculates - with a short sale - on the falling value of the financial instrument. In the case of derivatives, it is important to note the differentiation to the underlying: When characterizing with long or short, a distinction must be made as to whether the name refers to the derivative or to the underlying.
Transactions that serve to neutralize an open trade position, whether long or short, are referred to as a closeout, explains Aaron Hugh Braun.
In a broader sense, Long and Short are used analogously for position taking in any market parameters. For example, the position of a corporate bondholder in this jargon is called a "short credit spread " because the corporate bond loses value as the credit spread expands (increases).
For financial instruments whose value depends on several parameters, a distinction must be made between the parameters to which the long or short characterization refers. So is the position of a writer of a put option on a stock
generally "short option", because the writer gains money if the option loses value,
"Short volatility" because the option loses value and the writer loses money when the value of the options pricing implied volatility declines, and
"Long Share" because the option loses value and the writer gains money as the value of the underlying stock rises.
The price-determining parameters are considered under otherwise identical conditions.
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