Close Position
Definition of 'Close Position'Executing a security transaction that is the exact opposite of an open position, thereby nullifying it and eliminating the initial exposure. Closing a long position in a security would entail selling it, while closing a short position in a security would involve buying it back. The difference between the price at which the position in a security was opened, or initiated, and the price at which it was closed, represents the gross profit or loss on that security position. Taking offsetting positions in swaps is also very common to eliminate exposure prior to maturity.Also known as "position squaring." |
|
Investopedia explains 'Close Position'Positions can be closed for any number of reasons - in order to take profits or stem losses, reduce exposure, generate cash, etc.The time period between the opening and closing of a position in a security indicates the holding period for the security. This holding period may vary widely, depending on the investor's preference and the type of security. For example, day traders generally close out trading positions on the same day that they were opened, while a long-term investor may close out a long position in a blue-chip stock many years after the position was first opened. It may not be necessary for the investor to initiate closing positions for securities that have finite maturity or expiry dates, such as bonds and options. In such cases, the closing position is automatically generated upon maturity of the bond or expiry of the option. While most closing positions are undertaken at the discretion of investors, positions are sometimes closed involuntarily or by force. For example, a long position in a stock held in a margin account may be closed out by a brokerage firm if the stock declines steeply, and the investor is unable to put in the additional margin required. Likewise, a short position may be subject to a "buy-in" in the event of a short squeeze. |
Related Definitions
Articles Of Interest
-
Going Long On Calls
Learn how to buy calls and then sell or exercise them to earn a profit. -
Momentum Indicates Stock Price Strength
Momentum can be used with other tools to be an effective buy/sell indicator. -
Find Turning Points With Single-Day Patterns
On their own, single-day patterns can be unreliable, but that doesn't mean they can't be used effectively. -
10 Tips For The Successful Long-Term Investor
These guiding principles will help you avoid common folly during the decision-making process. -
Forex Tutorial: The Forex Market
In this online tutorial, beginners and experts alike can learn the ins and outs of the retail forex market. -
Why Is Monsanto Evil, But DuPont Isn't?
Monsanto is perhaps the most-hated company, but competitors like DuPont behave in very similar ways -
How To Interpret Thursday's Supreme Court Ruling Involving Myriad
Thursday's Supreme Court ruling is a blow to Myriad but investors haven't yet digested the ruling. -
Weyerhaeuser Has A Busy Father's Day
Weyerhaeuser makes a serious of moves that should build long-term value -
Google Goes A Waze To Stay Strong In Maps
Waze looks like a logical deal for shoring up the value of Google's mapping technology -
Market Summary For June 7, 2013
The major U.S. indices were mixed this week as modest improvements in employment numbers struggled to offset stagnant wages and a slightly higher unemployment rate.
Free Annual Reports