What Is Long Market Value?
The long market value is the aggregate value, in dollars, of a group of securities held in a cash account and/or margin account at a broker. Long market value is calculated using the prior trading day's closing prices of each security in the account; although, in a liquid market, current market values on individual securities are available real-time.
Long market value can be contrasted with short market value, which is the aggregate worth of all net short positions held.
- Long market value indicates the net value of all long positions held by an investor or trader, as computed by their brokerage.
- This will include most conventional asset classes held across cash and margin accounts, but may exclude certain non-traditional or exotic assets and/or derivatives.
- Long market value today can be calculated in real-time, and is typically based off changes from the previous day's closing prices.
Understanding Long Market Value
If an investor holds long positions, it means that the they have bought and own those securities, such as shares of stocks. Long positions increase in value when the market price of those holdings go up. By contrast, if the investor has short positions, it means that the investor has borrowed assets in order to sell them, and owes those securities to someone else, hoping to profit off a price decline in the market. To summarize, a "long" position describes when an investor owns a security and will profit if the security rises in price (i.e. buy low, sell high). Whereas a "short" position is the financial term used when a security is "sold," without actually owning the security. An investor can "short" a stock by borrowing the security from another holder, later buying the stock to close a position (sell high, buy low).
Long market values computed by brokerages will include long positions held among most common investment vehicles, but will often exclude holdings in commercial paper, options, annuities, and some precious metals. In this sense, most standard margin accounts will tabulate long market value for "vanilla" or conventional securities only. Although options and similar instruments are regularly used in portfolio management, they are not standard securities available for use with margin accounts.
Today, market value can be computed in real-time and displayed as such on a broker's web site or online trading platform. Some financial applications will still use the prior days ending balance as the current long market value of a portfolio. Convention dictates that if there is no previous closing price available for a given asset to be included in the calculation, a third-party valuation or previous bid price can be used.
Long Market Value and Margin
A margin account is a brokerage account in which the broker lends the customer cash (known as margin) used to purchase securities. The loan is collateralized by the securities and cash that are in the account. Because the customer is investing with a broker's money rather than his own, the customer is using leverage to magnify both gains and losses.
When securities are held in a margin account, and an investor borrows a broker's money to buy even more on margin, the long market value is used by the broker to monitor the cash or equity position of an account holder. If an account's equity balance starts to slip, because long positions are losing value, a broker will issue a margin call in order to replenish equity. If the margin call is not met, the broker may be forced to liquidate the account's holdings.