Definition of Position in Stock Trading

Your position with a stock refers to your ownership of it and the status of that ownership. For example, you might be holding it or you might be short on it. The amount of your stock also comes into play when you own a stock. “Position” is not a legal definition, so you don’t have to worry about getting yourself into any trouble if you tell someone what your position is when having a conversation.

Understanding “position” meaning in stock market trading will help you better understand what others are talking about, such as your broker or a friend, when you are discussing investments.

Establishing a Long Position

There are two main types of positions in trading. When you make a stock purchase, you establish your position. You can purchase the stock with the intent of profiting from it because you believe the price per share will go up. In this case, you have a long position.

While you own stock, your position is open. You can close your position by selling.

Read More​: How to Short a Stock

Establishing a Short Position

You can establish a short position by agreeing to a contract that has you borrowing stock you don’t own, betting it will go down in price. You make an agreement to return the stock later and even if it is worth more than you sold it after you borrowed it. If the price of the stock goes down after you sell it, you win.

Let’s say you take a short position by borrowing 1,000 shares from a broker at ​$20​ per share (​$20,000​). You sell it at the price to someone else and make ​$20,000​. You still owe 1,000 shares (not ​$20,000​) to your broker.

If the stock goes down to ​$15​ per share, you can close your position at that time by buying 1,000 shares of stock for the new price of ​$15,000​ and returning the 1,000 shares to your broker (this happens automatically when you make a short sale), making a ​$5,000​ in profit. If the price goes up to ​$25​ per share and you have to close your position, you lose ​$5,000​.

The Amount of Your Stock

The amount of stock you have is also part of your position. If someone asks your position, you would say, “I’m short 1,000 shares at ​$20​.” Or, you could say that you’re long 1,000 shares at ​$20​. If you have a portfolio that has a variety of different stocks, you will have different positions in each of those stocks.