What does closing a position mean?

Closing a position refers to executing a security transaction that is the exact opposite of an open position, thereby nullifying it and eliminating the initial exposure. Closing a long position in a security would entail selling it, while closing a short position in a security would involve buying it back.

Can a position be closed for a profit or loss?

Positions can be closed for either a profit or loss by taking the opposite position; for instance, selling shares that were purchased to open a long position. Positions may be closed voluntarily or involuntarily—as in the case of a forced liquidation or a bond that has reached maturity. Positions come in two main types.

What happens if you close out a position on an exchange?

What actually happens is that you enter into an agreement with the exchange. The agreement is your open position. To close out your position, you need to find another person you is willing to do the opposite to your open position (or a part of it).

What is the difference between open and closed positions?

Open positions can be either long, short, or neutral in response to the direction of its price. Positions can be closed for either a profit or loss by taking the opposite position; for instance, selling shares that were purchased to open a long position.