Position Limit

AAA

DEFINITION of 'Position Limit'

The highest number of options or futures contracts an investor is allowed to hold on one underlying security. Exchanges and/or regulatory bodies establish different position limits for each contract based on trading volume and underlying share quantity. The Chicago Board Options Exchange is one entity that calculates position limits for options exchanges.

INVESTOPEDIA EXPLAINS 'Position Limit'

Position limits are created for the purpose of maintaining stable and fair markets. Contracts held by one individual investor with different brokers may be combined in order to accurately gauge the level of control held by one party.


Wall Street reform regulations enacted in the aftermath of the financial crisis of 2008 required the Commodity Futures Trading Commission to establish position limits for commodity futures and swaps.

RELATED TERMS
  1. Aggregate Risk

    The exposure of a bank, financial institution, or any type of ...
  2. Option

    A financial derivative that represents a contract sold by one ...
  3. Position

    The amount of a security either owned (which constitutes a long ...
  4. Small Trader

    An options or futures trader holding or controlling positions ...
  5. Commodity Futures Trading Commission ...

    An independent U.S. federal agency established by the Commodity ...
  6. Corner A Market

    To acquire enough shares of a particular security type, such ...
Related Articles
  1. Mutual Funds & ETFs

    ETF Options Vs. Index Options

  2. Options & Futures

    Cut Down Option Risk With Covered Calls

  3. Options & Futures

    Options Basics Tutorial

  4. Options & Futures

    The Controversy Over Option Expensing

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center