What Does Long & Short in the Stock Market Mean?

Long and short refer to an investor's market position with a particular brokerage. An investor that's long in the market buys stock, whereas the investor that's short sells stock borrowed from her broker.

Long position

According to Financial Web, "To be long means to have a positive market position; in other words, the investor owns a particular security." Mr. Investor orders his broker to buy 1,000 shares of Pear Computers. As soon as the trade is complete, he his long 1,000 shares of this security.

Short position

Investopedia defines short as, "The sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value." Ms. Trader shorts 1,000 shares of Pear Computer, hoping the price will drop.

Flat position

Long and short are heard daily in the financial news, but flat is not. A flat account no longer holds positions. The investor has exited all positions of a given security.

Account types

A standard brokerage account is required to maintain long positions. A margin account is required to trade short positions.

Hedging

Some investors have long stock positions and short options positions on the same stock. The goal is to hedge or offset potential losses in one security with an investment in its negative counterpart.

References

• Financial Web: Investing - Long, Short, Flat
• Investopedia: Articles - Basics
• Market program: Glossary