Long Position (Long)

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Long Position (Long)

Definition

A long position is owning an asset or a contract with the expectation that its value will rise (or, in some contract forms, to secure the right to transact at a specified price). It is the opposite of a short position.

Key takeaways

  • Going long typically means buying and holding an asset (stocks, bonds, funds) expecting appreciation.
  • In options, a long position can be a long call (bullish) or a long put (bearish on the underlying but protective for an owned position).
  • In futures/forwards, a long position obligates the buyer to take delivery (or settle) at contract expiry.
  • Long positions expose you to upside potential but also to downside risk and capital lock-up.

How a long position works

  • Cash markets: Buying and owning the underlying asset (e.g., shares of stock). Profit if the market price rises; loss if it falls.
  • Options:
  • Long call — the holder has the right (but not the obligation) to buy the underlying at a specified strike price before expiration; profits if the underlying rises above strike plus premium.
  • Long put — the holder has the right to sell the underlying at the strike price; profitable if the underlying falls below strike minus premium. Long puts are often used as downside protection when you already own the underlying.
  • Futures/forwards: The long party agrees to buy the underlying at a future date at a pre-agreed price. Unlike options, futures/forwards create an obligation to buy (or settle) at expiry unless the position is closed beforehand.

Types of long positions

  1. Holding an investment (buy-and-hold)
  2. Typical retail and long-term investor approach.
  3. Benefits from long-run market appreciation and compound returns.

  4. Risks include market crashes, prolonged bear markets, and capital illiquidity.

  5. Long options contracts

  6. Long call — bullish leverage with limited downside equal to the premium paid.

  7. Long put — bearish payoff or insurance for a held asset.

  8. Long futures/forwards

  9. Used by businesses to lock in future purchase prices (hedging) or by speculators to profit from expected price increases.
  10. Creates an obligation to transact at contract terms.

Pros and cons

Pros
* Captures upside if prices rise.
* Aligns with historical long-run equity growth (for broad-market equity holdings).
* Options provide leveraged upside with limited loss (premium).
* Futures/forwards can lock in prices and hedge input costs.

Cons
* Losses occur if prices decline; timing risk can be severe (e.g., before retirement).
* Capital can be tied up, limiting other opportunities.
* Options expire, so timing and premium costs matter.
* Futures obligate settlement, which can create delivery or cash-settlement exposure.

Examples

  1. Buying stock

  2. Jim buys 100 shares of MSFT because he expects the price to rise. He is “long 100 shares of MSFT.” If MSFT rises, Jim benefits; if it falls, his position loses value.

  3. Long call option

  4. Jim buys one MSFT call with a $75 strike and $1.30 premium (one option = 100 shares). At expiry he will profit if MSFT > $75 + $1.30 because he can buy at $75 and capture the difference net of premium.

  5. Long put as insurance

  6. Jane owns 100 shares of MSFT and buys one put with a $75 strike for $2.15. If MSFT falls below $75 − $2.15, the put offsets losses by allowing her to sell at $75, minus the premium cost.

How a long differs from a short

A long position profits when prices rise; a short position profits when prices fall. Shorts often involve borrowing the asset (or selling an asset you don’t own) and face different risk dynamics, including theoretically unlimited loss on uncovered short stock.

Where long positions are used

Long positions are used across markets: equities, bonds, currencies, commodities, mutual funds, ETFs, options, and futures. They serve both speculative goals (profit from price appreciation) and hedging goals (lock in prices or protect holdings).