Long, Short, Flat: What Your Position Means

The terms "long", "short", and "flat" identify an investor's market position with respect to a given stockbroker. To be long means to have a positive market position; in other words, the investor owns a particular security. He is therefore "long" any securities that his brokerage firm is holding for him. If the investor orders the broker to buy 1,000 shares of Widget, Inc., for example, he "goes long" immediately after the trade is executed for him. His account remains "long 1,000 Widget" until the investor either asks the broker to forward the stock certificates to him, or to sell the shares.

If all shares are sold while they're in the possession of the broker, the investor's account will become flat (or, a zero position). The sell trade "flattens" his position. The position will also become flat (as far as the investor's account with the brokerage firm is concerned) if the investor asks to take physical delivery of the shares. The shares are transferred to the investor's name and forwarded to him (this cannot be done in margin accounts). The account documentation will read "delivered 1,000 Widget", or "1,000 Widget del". The word "flat" does not appear on the account statement; it's simply the broker's signification that no shares are owed to the investor.

A partial reduction of the shares held by the brokerage house does not flatten the account. For instance, if the investor is long 1,000 Widget and sells 500 shares, his long position is not flattened, but simply reduced to 500 shares. Additionally, if the broker sends 200 of the remaining 500 Widget shares to the investor at his request, then the long position is further reduced to 300 shares. The investor's long position reflects only his standing with the particular brokerage firm, since the firm has no way of knowing what shares the investor might have at home, with other brokerages, or with banks.

If the investor sends the brokerage firm stock to be held in his account, the transaction is posted as a "receive". Therefore, purchases and receives will create or increase long positions; sales and delivers reduce or eliminate long them.

All of the investor's individual positions are kept separate by the broker. For example, if the investor owns 500 shares of HIJ stock, 600 shares of MNO, and 700 shares of UVW (a total of 1,800 shares of the three different stocks), the brokerage account will not show the position as "long 1,800," but will rather show "long 500 HIJ; long 600 MNO; long 700 UVW".

Stock that's been borrowed to complete a short sale will result in a negative, or short, position. Since a short sale is the sale of something that the investor doesn't own, after the sale the stock is owed to the person or entity from which it was borrowed. Until the shares are returned to their owner (with the use of a 'buy' transaction to cover them), the investor remains short that position. Some active investors' trading accounts have both long positions (where the customer is bullish and expects the long stocks to go up in price) and short positions (in which the customer is bearish on the short stocks and expects their prices to fall) at the same time. Short sales may only be executed in a margin account.

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