Net Short


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.


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.

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