Definition of Position diagram

Position diagram

diagram showing the possible payoffs from a derivative investment.

Changes in Financial Position

Sources of funds internally provided from operations that alter a company's
cash flow position: depreciation, deferred taxes, other sources, and capital expenditures.

Clear a position

To eliminate a long or short position, leaving no ownership or obligation.

Composition

Voluntary arrangement to restructure a firm's debt, under which payment is reduced.

Long position

An options position where a person has executed one or more option trades where the net
result is that they are an "owner" or holder of options (i. e. the number of contracts bought exceeds the
number of contracts sold).
Occurs when an individual owns securities. An owner of 1,000 shares of stock is said to be "Long the stock."
Related: Short position

Limitation on asset dispositions

A bond covenant that restricts in some way a firm's ability to sell major assets.

Modigliani and Miller Proposition I

A proposition by Modigliani and Miller which states that a firm cannot
change the total value of its outstanding securities by changing its capital structure proportions. Also called
the irrelevance proposition.

Modigliani and Miller Proposition II

A proposition by Modigliani and Miller which states that the cost of
equity is a linear function of the firm's debt-equity-ratio.

Open position

A net long or short position whose value will change with a change in prices.

Position

A market commitment; the number of contracts bought or sold for which no offsetting transaction
has been entered into. The buyer of a commodity is said to have a long position and the seller of a commodity
is said to have a short position . Related: open contracts

Short position

Occurs when a person sells stocks he or she does not yet own. Shares must be borrowed,
before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought to close out the
transaction. This technique is used when an investor believes the stock price will go down.

Take a position

To buy or sell short; that is, to have some amount that is owned or owed on an asset or
derivative security.

Long position

Outright ownership of a security or financial instrument. The
owner expects the price to rise in order to make a profit on some future sale.

Short sale, short position

The sale of a security or financial instrument not
owned, in anticipation of a price decline and making a profit by purchasing the
instrument later at a lower price, and then delivering the instrument to
complete the sale. See Long position.

long position

Purchase of an investment.

MM dividend-irrelevance proposition

Theory that under ideal conditions, the value of the firm is unaffected by dividend policy.

MM's proposition I (debt irrelevance proposition)

The value of a firm is unaffected by its capital structure.

MM's proposition II

The required rate of return on equity increases as the firm’s debt-equity ratio increases.

short position

The sale of an investment, particularly by someone who does not yet own it.

Fallacy of Composition

The incorrect conclusion that something that is true for an individual is necessarily true for the economy as a whole.

Policy-Ineffectiveness Proposition

Theory that anticipated policy has no effect on output.

Deemed Disposition

Under certain circumstances, taxation rules assume that a transfer of property has occurred, even though there has not been an actual purchase or sale. This could happen upon death or transfer of ownership.

Financial Position

Status of a firm's assets, liabilities, and equity accounts as of a certain time, as shown in its financial statement.

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