What does it mean when a stock is in a long position?


Quick Answer

When an investor is in a long position with a stock, he has bought that stock with the expectation of the stock value rising, according to the Nest. If the stock price falls, an investor in a long position only loses the amount he has invested. Most investors in the stock market are in such a position.

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Full Answer

To get into a long position, the investor simply buys the stock at the set value and waits for it to rise, says the Nest. When the value of the stock rises, the investor's gain is only on paper and does not convert to cash, or profit-taking, as it is known, until the investor sells the shares. Selling the shares prevents the investor from making greater profits if the price of the stock continues to rise.

Being in a long position is the opposite of being in a short position, reports the Nest. In a short position, the investor is doing the opposite of what he does in a long position. He is selling stocks borrowed from his broker at a certain price, expecting the price to drop, and then buying the stocks back at a lower price to return to the broker, along with an interest charge for the use of the stocks. The broker gets the stocks back, and the investor makes the profit from the difference between the selling and purchase prices of the stock.

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