Expert Chaslau Koniukh
  • Companies
  • Global investment
  • Investors
  • Terminology
  • Economy
  • Stock Market
  • World exchanges
  • Tech and Marketing
offset
Market terminology

What offset means: application of the mechanism to stock exchange activity

22.12.2022
2 min read

Offset as a convenient option to eliminate an unprofitable position

Offset is an English term used in the brokerage business. It has several meanings, for the understanding that it is necessary to consider in detail the processes of the stock market.
In the first case, an offset is applied when it is necessary to eliminate a futures position. For this purpose, the broker opens a position of the same size as the required one, but the opposite one. In this way, it is possible to cancel delivery obligations. For example, if the broker opens a long position on a certain futures contract, then its elimination requires the opening of a similar position, but for sale, that is short. This position will be considered an offset position. Players resort to this option when they need to get rid of all liabilities on positions that were opened earlier.
Most futures positions can be liquidated with an offset, but this must be done before the delivery period of the contract in question has occurred. Despite the fact that futures liabilities can be liquidated in a fairly simple way, contracts of this type are still considered the best way to hedge.what is an offsetThe second option of an offset is used when the investor needs to bring the net position to zero. And in this case, it is important that in the future such a position should bring neither profit nor loss. If buying was originally planned, the investor can get rid of it by selling. If it is necessary to make an offset during the sale, the position is bought. For example, if it is required to offset a long position using the shares, it is necessary to sell the same amount of shares. As a result, the investor is left with a zero number of securities in his possession, which means that it is impossible to gain profit or make a loss on them.
The mechanism of an offset is due to the very basis of activity on the exchange. In order to take part in trading, a broker needs to open or close a position. Entering the market is the opening, and exiting is the closing of positions. Accordingly, if there is no action opposite to the initial one, then the participant does not make a profit as well as a loss. To cancel a position, it is also necessary to close it, which is done by an offset, and in this case, the broker acts as both a seller and a buyer at the same time. This option is the only way to get rid of the current futures contracts, if necessary.
Offset is a fairly common mechanism on the market, but often players open a large number of positions and only later analyze their financial feasibility. To get rid of an unprofitable option, they open a reverse trade, but it is important to do it in time, before the deadline. Otherwise, the offset will be useless.

Tags: Market terminology
0
Previous Post Amazon's cloud infrastructure expands its capacity in Thailand Next Post Delta Air Lines: one of the largest airlines in the world

You Might Also Like

Forex drawdown
Market terminology
Forex drawdown and why you shouldn’t be afraid of it
22.09.2023
property tax
Market terminology
Property tax: an overview of the calculation and its feasibility
23.01.2023
dead cat bounce-2
Market terminology
The “dead cat bounce” pattern: what it is and the benefits of the strategy
27.02.2022
swing trading
Market terminology
Swing trading: essence of the strategy and its benefits
24.03.2021
crowdinvesting
Market terminology
Crowdinvesting as a popular tool for generating income
21.04.2023
commodity channel index
Market terminology
Commodity channel index: distinguishing features of the CCI
15.01.2023

Popular Posts

  • Ingeborg Mootz: a woman who became a stock player at the age of 75
  • Businessman Chuck Feeney: the man who gave the world Duty Free
  • Analysts: Egypt’s economy to continue falling in 2023
  • Field of activity of the American Monsanto Company Corporation

Editor's Picks

Chaslau Koniukh
Analytics

American bankers from JPMorgan and Goldman Sachs advise to invest in gold: review by Chaslau Koniukh.

Press Secretary
17.08.2020
Expert Chaslau Koniukh
Analytics

Chaslau Koniukh on the analysts’ opinion on the key stake size change soon

Press Secretary
18.06.2020
expert Chaslau Koniukh
Analytics

Chaslau Koniukh: Internet trade market in Russia may reach 2.78 trillion rubles.

Press Secretary
30.05.2020
Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh
Analytics

Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh

Press Secretary
16.05.2020

Popular Posts

  • Ingeborg Mootz: a woman who became a stock player at the age of 75
  • Businessman Chuck Feeney: the man who gave the world Duty Free
  • Analysts: Egypt’s economy to continue falling in 2023
  • Field of activity of the American Monsanto Company Corporation
  • Spain’s economy performs best in the EU
Expert Chaslau Koniukh
  • Facebook
  • Twitter
  • Instagram

© 2024 CHASLAU KONIUKH. ALL RIGHTS RESERVED. Expert in marketing and project management, international investments, financial analyst.

Menu

  • Biography
  • Companies and corporations
  • Global investment
  • Investors and Entrepreneurs
  • Economy
  • Market terminology
  • Stock Market
  • World exchanges
  • Tech and Marketing
  • Analytics