Close out

The neutralization of an entered stock exchange transaction by opening a long or short position which is the exact opposite to the original position.

Investors can only take one of two basic investment directions: they go long or short. Investors buying stocks, bonds, funds or derivatives in order to benefit from increasing prices go long. Investors holding long positions expect rising prices and take the risk of falling prices. Going short means to sell securities without actually holding them (short sale) respectively betting on falling prices by buying the appropriate derivative instruments. Holding a short position means expecting falling prices while taking the risk of increasing prices. By closing out investors neutralize these risks by closing the position or by a quid-pro-quo transaction.

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