In finance, a position refers to the volume of a specific commodity, currency or security owned or held by an entity or a person. In financial trading, it is a future convention does not replicate possession but reasonably a binding assurance to sell or buy a specific number of financial instruments such as currencies, commodities and securities for a particular price.
The idea of position is used widely in financial instruments or derivatives trading. There are several types of positions, but here we will discuss the only net position.
Net position is the difference amongst total open short and open long positions in a certain asset such as a commodity, foreign exchange currency or security held by an entity or an individual. It also refers to the value of assets held by a firm, person or financial institution as well as the possession status of an institution or a person’s investments.
The value of net position is calculated by deducting the prior total of setting up the position. For example, if $200 options were purchased at a cost of $1 each and option is currently trading at $7, the value of net position is $1400 – $200 = $1200.