Investment accounts held with brokerage houses reflect two types of holdings: long positions and short positions. Long positions are shares of stock which the investor owns. Short positions are shares of stock which the investor borrows from another investor. Shares are held in a long or short position depending on the investor's market outlook. At the end of each trading day, the value of the long and short positions is recorded for each account.
What Is a Brokerage Account?
A brokerage account is an account held with an investment bank that contains individual portfolios for financial assets, such as stocks and bonds. A brokerage account may be used for actively trading such assets via direct instructions to a mediating broker-dealer, or as a depository for long-term holdings with occasional trading if the broker-dealer believes it prudent. Securities held in the account may be either owned (long) or on loan (short).
What Is a Long Stock Position?
An investor who holds a long position in a given stock maintains actual ownership in shares of that stock. If an investor chooses to sell shares of his long stock position, he receives the market value in cash less any brokerage fees. For this reason, investors hold long positions in a stock if they expect the stock's market value to appreciate.
Video of the Day
What Is a Short Stock Position?
An investor who holds a short position in a stock borrows shares of that stock from another investor. In order to derive cash from trades in short stock positions, the holder must first sell the shares and then buy them back once the market price has decreased. For this reason, investors hold short positions in stocks which they believe will experience a decline in market value. Short stock positions bear more risk than long positions, because an unexpected rise in price could result in devastating losses.
What Is Long Stock Value?
Long stock value is simply the total value of a brokerage account's long stock positions as calculated at the end of a given business day. This valuation represents the value of assets in the account which belong to the investor.