The word ‘position’ is used quite frequently on business channels by analysts and others.
In simple words, a position is money invested in the stock market.
When you buy a stock, it’s called taking a position. When you exit or sell the same stock, it’s called ‘closing the position’.
The word ‘Position’ can be used in various contexts. The term is used to convey various situations.
You could hear the following:
- “I am carrying four positions”: This means the person is holding four different stocks currently.
- “I closed my position in Reliance Industries”: The person was either long or short on Reliance Industries, he has now closed the position and taken money out of the market.
- “I have taken a small position”: This means the person has bought or sold a stock in small quantity, which he might increase or close in the future.
- “I have a big position in Asian Paints”: This means the person is holding huge quantity of Asian Paints.
- “I have a long position in TCS”: This means the person expects the price of TCS to rise in the future, which is why he is long.
- “I have a short position in HDFC Bank”: This means the person is bearish on HDFC Bank and expects the price to fall in the future – which is why he has shorted the stock.
What is Long Position?
When you buy a stock expecting the price to rise in the future, it’s called a long position.
Example: A person is bullish on Reliance Industries and buys the share at ₹ 1500. This means, he expects the price to rise in the future. He could say “I am long on Reliance Industries” or “I have a long position in Reliance Industries”.
What is Short Position?
When you sell a stock expecting the price to fall in the future, it’s called a short position.
Do note, you do not need to buy a stock first before selling it. You can sell without buying. In the cash segment, this is only possible in intraday trading.
Which means, if you sell today, you have to buy or close the position on the same day.
Example: A person is bearish on TCS and sells the share at 1900. Soon, the price falls to 1875, he buys / exits and closes his position. The profit is ₹ 25.
When he sells, he could say “I am short on TCS” or “I have a short position in TCS”. Both mean the same.