DEFINITION of 'Offset'

1. To liquidate a futures position by entering an equivalent, but opposite, transaction which eliminates the delivery obligation.

2. To reduce an investor's net position in an investment to zero, so that no further gains or losses will be experienced from that position.


1. Investors will offset futures contracts and other investment positions in order to remove themselves from any associated liabilities. Almost all futures positions are offset before the terms of the futures contract are realized. Despite the fact that most positions are offset near the delivery term, the benefits of the futures contract as a hedging mechanism are still realized.

2. If the initial investment was a purchase, a sale is made to neutralize the position; to offset an initial sale, a purchase is made to neutralize the position. For example, if you wanted to offset a long position in a stock, you could short sell an identical number of shares. By doing so, your net ownership of the stock would be zero, and you would not incur any further gains or losses from the position.

  1. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  2. Forward Contract

    A customized contract between two parties to buy or sell an asset ...
  3. Offsetting Transaction

    In trading, an activity that exactly cancels the risks and benefits ...
  4. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  5. Futures Contract

    A contractual agreement, generally made on the trading floor ...
  6. Outright Futures Position

    A long or short trade on an underlying futures contract that ...
Related Articles
  1. Forex Education

    Getting Started In Foreign Exchange Futures

    Learn how these futures are used for hedging and speculating, and how they are different from traditional futures.
  2. Forex Education

    Forex: Gauging Forex Market Sentiment With Open Interest

    Examining open interest on currency futures can help you confirm the strength of a trend in forex market sentiment.
  3. Options & Futures

    Options On Futures: A World Of Potential Profit

    There's one simple hurdle in the transition from stock to futures options: learning about product specifications.
  4. Options & Futures

    Trading Options With The Zero-Cost Cylinder

    The zero-cost cylinder allows traders to effectively trade the market while protecting their downside.
  5. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  6. Options & Futures

    Terrorism's Effects on Wall Street

    Terrorist activity tends to have a negative impact on the markets, but just how much? Find out how to take cover.
  7. Investing Basics

    Explaining the Liquidity Preference Theory

    According to the liquidity preference theory, investors demand interest in return for sacrificing their liquidity.
  8. Options & Futures

    Ultra ETFs Are Not Your Father's ETFs

    Ultra ETFs can add huge returns to your portfolio, but there's a lot of risk and volatility involved with these leveraged ETFs.
  9. Active Trading Fundamentals

    How to Trade Dow Jones Future Contracts

    Learn about the Dow Jones Index futures contracts available and obtain step-by-step instruction on how to trade the stock index futures.
  10. Options & Futures

    Haunting Wall Street: The Halloween Terminology Of Investing

    Beware of zombies and Jekyll and Hyde companies! Read about the spooky terms circulating Wall Street.
  1. Are Social Security benefits affected by unemployment benefits?

    According to the Social Security Administration, unemployment benefits do not affect Social Security benefits, but Social ... Read Full Answer >>
  2. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  3. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  4. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  5. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  6. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  2. Bullish Engulfing Pattern

    A chart pattern that forms when a small black candlestick is followed by a large white candlestick that completely eclipses ...
  3. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  4. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
Trading Center