A position that has been terminated or ended.

What Is a Close Position?

Closing a position refers to executing a security transaction that is the opposite of an open position, nullifying it and eliminating the initial exposure. Completing a lengthy role in security would entail selling it while closing a short position in security would involve repurchasing it. Taking offsetting positions in swaps is also very common to eliminate exposure before maturity.

Understanding Close Positions

When trades and investors transact in the market, they are opening and closing positions. The initial position on security is an open position, and this could be either taking along part or a short place on the asset. To get out of the work, it needs to be closed. A long will sell to complete; a short will buy to close.

Closing a position thus involves the opposite action that opened the work in the first place. An investor who purchased Microsoft (MSFT) shares, for example, holds those securities in his account. When he sells the shares, he closes the long position on MSFT.

The difference between the price at which the position in security was opened and the price at which it was closed represents the gross profit or loss on that security position. Parts can be locked for many reasons—to take profits or stem losses, reduce exposure, generate cash, etc. An investor who wants to offset his capital gains tax liability, for example, will close his position on losing security to realize or harvest a loss.

Closing a position is also known as "position squaring."