Long (finance)

To be long is to buy a futures contract before selling it. The clearinghouse holds margin as a good faith deposit. No interest or dividends are received when long a futures contract. There is no deterioration of your capital because of time, as there may be with options. When there is no fluctuation in price it does not cost anything to maintain a long futures position. New contracts are only created out of open interest increasing transactions, involving a new seller and a new buyer.

Spread traders may create spreads by holding long and short contracts simultaneously in the same or related security markets. Spread traders do not necessarily hope that prices will rise on the long side. They may be depending on their shorts to fall at a faster rate than the longs side slides. The long side may be on, just to minimize drawdowns, reduce margin requirements and increase return on margin. The long side may not be expected to move at all.

See also

• Hedging

External links

• Long