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What is a Net Position?

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  • Written By: A. Leverkuhn
  • Edited By: Andrew Jones
  • Last Modified Date: 21 August 2016
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    Conjecture Corporation
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In finance, an investor’s net position is the total of current, open, long positions that he or she owns calculated against his or her total of current, open, short positions in a given security. Long and short positions in stocks or securities have opposite incentives and values. An investor who wants to see which kind of position is greater can use net position calculations.

A short or long position in a stock or security is referred to as “open” as long as it is owned by the investor. When the investor sells it, the position is considered “closed.” When a position has been closed, investors calculate yield against the cost basis to figure out how much they have profited from the sale.

A long position in a stock or other security is a traditional buy of that particular stock, where the owner profits from a rise in stock price if he or she sells the stock higher at a later date. A short position includes some complex transactions, where the position holder uses a “promise to sell” approach in order to profit from a decrease in stock price. These two kinds of positions are obviously in conflict with one another, and effectively cancel each other out, given an identical sale time for both. A net position can show which position has a greater comparative value.

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When an investor has both long and short positions in the same stock, net position can be extremely valuable. An automatically calculated net position can help traders who have a large volume of positions in one or several securities. Making the balance sheet simpler can help an investor make the right decisions about buying and selling positions.

It’s important to note that a net position might also refer to a person or a company’s ownership in various assets. Here, a net position might be useful in showing the total value of an asset on a corporate balance sheet. This kind of calculation may be called a “net economic position” or a “net asset value against liability.”

Software products that include these kinds of net calculations are getting more popular with individuals and businesses who invest in more complex ways. With all of the intricate positions taken in today’s markets, net position may become a more useful and necessary part of organizing profit potential for an individual or a corporation of interests. Financial software product providers build net calculation features into products to help make life easier for those who are looking for profits on both short and long positions.

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