Net Short

AAA

DEFINITION of 'Net Short'

A condition in which an investor has more short positions than long positions in a given asset, market, portfolio or trading strategy. Investors who are net short will benefit when the price of the underlying asset decreases.

INVESTOPEDIA EXPLAINS 'Net Short'

Sometimes advanced traders will attribute a larger proportion of their portfolio to short positions rather than to long positions. This type of portfolio will increase as the prices of the underlying securities decrease because investors are borrowing securities from brokers and selling them on the market in hopes of buying them back later at a lower price. This type of position is taken by many large hedge funds and should only be attempted by experienced traders.


Whenever you see a chart showing "net short positions" on a particular currency (or on any other asset underlying a futures contract), it is implied that the chart depicts net short positions taken by the so-called non-commercial traders only (i.e., speculators). In general, any clearing house, such as the CME Group, should theoretically have a zero net position at any point in time. This means that the number of traders taking short positions equals the number of traders taking long positions, because the clearing house is just an intermediary. That's why the concept of "net short positions" varying over time may sound confusing.

Being net short is the opposite of being net long.

RELATED TERMS
  1. Hedge Fund

    An aggressively managed portfolio of investments that uses leveraged, ...
  2. Short Selling

    The sale of a security that is not owned by the seller, or that ...
  3. Square Position

    A term used in foreign-exchange trading. The term "square position" ...
  4. Net Long

    A condition in which an investor has more long positions than ...
  5. Short (or Short Position)

    1. The sale of a borrowed security, commodity or currency with ...
  6. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
RELATED FAQS
  1. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  2. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  3. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  4. What percentage of a diversified portfolio should large cap stocks comprise?

    The percentage of a diversified investment portfolio that should consist of large-cap stocks depends on an individual investor's ... Read Full Answer >>
  5. Why should an investor include an allocation to the telecommunications sector in ...

    An investor should include an allocation to the telecommunications sector in his portfolio, because telecom offers an investor ... Read Full Answer >>
  6. What are some mutual funds that do not have 12b-1 fees?

    Some of the most popular and best-performing mutual funds that do not include any 12b-1 fees in the expenses charged to fund ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    Taking A Look Behind Hedge Funds

    Hedge funds can draw returns well above the market average even in a weak economy. Learn about the risks.
  2. Active Trading Fundamentals

    Surviving Bear Country

    Stay calm, play dead and keep your eyes open for attractive valuations.
  3. Active Trading Fundamentals

    Short Selling Tutorial

    Want to profit on declining stocks? This trading strategy does just that.
  4. Professionals

    Advisors: Start Coaching Clients from the Start

    Behavioral coaching is vital to help investors stick to plan during market turbulence. Start coaching early and maintain it through the relationship.
  5. Mutual Funds & ETFs

    5 Disadvantages of Mutual Funds Compared to ETFs

    In the mutual funds vs. exchange-traded funds debate, ETFs have some clear advantages.
  6. Trading Strategies

    Pros And Cons Of Paper Trading

    Most market novices should paper trade for a considerable amount of time, despite key drawbacks.
  7. Mutual Funds & ETFs

    The Daily Routine Of A Hedge Fund Manager

    What does a hedge fund manager's day really look like? Investopedia provides an inside look at the routine.
  8. Mutual Funds & ETFs

    Top 3 ETFS for Investing in Germany

    Discover why Germany is considered an economic powerhouse in the eurozone, and learn about the three ETFs that provide investors exposure to Germany’s economy.
  9. Fundamental Analysis

    20-Year Treasury Bond ETF Trading Strategies

    iShares 20-Year Treasury Bond ETF offers a highly liquid equity alternative to direct bond exposure.
  10. Technical Indicators

    How To Interpret The Volume Zone Oscillator

    Introduced in 2009, the Volume Zone Oscillator (VZO) is gaining traction with traders and technicians.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!