Legal Definitions - long

In finance, "long" refers to holding a security or commodity with the expectation that its price will rise. To "be long" or "buy long" means to acquire such an asset, establishing a position that profits from an increase in market value.

Long, in a financial context, describes an investment strategy where an individual or entity purchases an asset, such as stocks, bonds, or commodities, with the expectation that its market value will increase over time. The investor holds onto this asset, anticipating a future sale at a higher price to generate a profit. This approach is based on an optimistic outlook for the asset's future performance.

• Example 1: Investing in a Growth Stock

  Imagine Maria buys 500 shares of "GreenEnergy Corp." stock. She has researched the company extensively and believes their innovative renewable energy technology will lead to significant market expansion and higher profits in the next few years. Maria expects the stock price to rise considerably as the company grows.

  Explanation: Maria is considered "long" on GreenEnergy Corp. stock because she has purchased and holds the shares with the specific intent of profiting from an increase in their market price. Her investment represents a "long position" in the company.

• Example 2: Speculating on Commodity Prices

  Consider a large investment fund that purchases a substantial number of silver futures contracts. The fund managers have analyzed global economic trends and anticipate that industrial demand for silver will surge, while mining output will remain constrained, leading to an increase in the commodity's price over the next six months.

  Explanation: The investment fund is "long" silver. By buying these futures contracts, they are taking a position that will benefit if the price of silver rises, demonstrating their expectation of appreciation.

• Example 3: Holding Government Bonds for Appreciation

  An institutional investor, like a pension fund, acquires a significant portfolio of long-term treasury bonds. They predict that future interest rate cuts by the central bank will make existing bonds, which offer a higher fixed interest rate, more attractive and thus more valuable in the secondary market.

  Explanation: The pension fund is "long" on these treasury bonds. They are holding these debt instruments with the expectation that their market value will increase due to changing economic conditions, allowing the fund to sell them for a profit before maturity if desired.