What is a long position?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 3 min
In short
A long position is one opened by buying: it gains when the price rises and loses when it falls. Bought on spot, the downside stops at what you paid. Bought on margin, the same position can be liquidated and the loss can exceed the collateral.
Key points
- A position opened by buying and then held
- It gains on a rise and loses on a fall
- On spot, the loss stops at the amount invested
- On margin, the position can be force-closed
Definition
A holding created by buying an asset, closed out by selling it or by settling the contract.
The word comes from futures and margin markets, but it is also used loosely for simply owning the asset. Buy one BTC and hold it, and you are long bitcoin. Nothing is realised until you close: until then the value simply moves.
The same long carries different risks on spot and on margin. A spot long can fall to zero and still cost you only the purchase price, and nothing closes it for you. A margin long is closed automatically once the maintenance ratio breaks, crystallising the loss at that point.
You exit a long by selling or by trading the opposite side. On margin, funding charges and interest normally accrue daily for as long as the position is open, so an identical long costs more the longer it is held.
Watch out for
- · A margin long can be liquidated in a sharp fall, taking the collateral with it
- · Even on spot, a price decline can leave the holding worth far less than you paid
- · Funding and interest accrue while the position is open, whether or not the price moves