Net position

The sum of every open position in one instrument, with short size subtracted from long size, reduced to one direction and one quantity. It describes exposure rather than history: the same net figure can sit under one contract or under a dozen opened at different prices on different days. A net figure of nil is described as flat, and means the account has no exposure to that instrument's price at that moment.

Whether the net figure is an object or a derivation depends on how the account keeps its books. Under netting accounting one position exists per instrument and an order in the opposite direction reduces it, closes it or reverses it, so the net figure is the position and there is nothing else to add up. Under hedging accounting long and short contracts in the same instrument coexist as separate rows, each with its own opening price, and the net figure is worked out across them.

Two things regularly trip readers up. The first is cost: holding both sides on a hedging account leaves the net exposure to price at nil while both legs continue to attract financing and both were opened across a spread, so a flat net figure is not a free position. The second is scope. Netting happens per instrument, so an account can be flat in every individual instrument and still carry a large single exposure across them, as when several separate pairs share the same currency on the same side. Desks that measure risk by currency rather than by instrument do so for exactly that reason, and the two views of the same account routinely disagree.