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What does close position in futures mean?
If the trader closes the futures position for a loss the funds are withdrawn from the traders account and their account balance will go down. Once trades are closed the margin that was being used for that trade is no longer needed and that margin is now available if the trader wants to place another futures order.
What does position closing mean?
Key Takeaways. Closing a position refers to canceling out an existing position in the market by taking the opposite position. In a short sale, this would mean buying back the security, while a long position entails selling the security.
Is closing a position the same as selling?
Closing a long position in a security would entail selling it, while closing a short position in a security would involve buying it back. Taking offsetting positions in swaps is also very common to eliminate exposure prior to maturity. Closing a position is also known as “position squaring.”
What happens when you close a futures position?
If the trader closes the futures position for a loss the funds are withdrawn from the traders account and their account balance will go down. Once trades are closed the margin that was being used for that trade is no longer needed and that margin is now available if the trader wants to place another futures order.
What happens when a buy order is placed on futures?
For example, if a trader is long on a contract, a sell order will close the trade and the trader will no longer have a position in the contract. If a futures position is short, a buy order closes out the position. A futures broker automatically matches up opposite orders with open positions.
How do I close or cancel a futures contract?
To close or cancel out a futures contract position, a trader simply enters the opposite type of trade and the contract will be removed from the trader’s account.
What is the difference between closing futures and stocks?
The other obvious difference between closing futures and stock is that a futures position must be closed at some point, or it will eventually lead to a commitment to either deliver or take delivery of product.