The Management of Positions

Once trades have been executed, they create positions. If the quantity purchased of a particular instrument exceeds the quantity sold, then the position is a long position. If the quantity sold exceeds the quantity purchased, then it is a short position. This chapter discusses the management of positions. During the life of a position, a number of events take place, some of which are externally driven and result from actions taken by the issuer of a security or by the nature of a derivatives contract or the legal agreement underpinning a debt instrument, while others are internally driven and arise from good financial practice. The chapter summarises all those events and discusses the difference between trade dated, value dated, and settlement dated positions. The trade dated position is the net quantity of an instrument or contract bought or sold up to and including the most recent trade, while the value dated position is the net quantity bought or sold where value date is equal to or earlier than today. The settlement dated position is the net quantity that has settled on or before today.