What does taking a long position in stock mean?

What does taking a long position in stock mean?

• A. Buying a stock expecting its price to rise.
• B. Selling a stock in anticipation that its price will rise.
• C. Holding cash for the day.
• D. Shorting a stock to profit from a decline.

Answer: (A)

Taking a long position means you expect the stock’s price to rise and you buy it now to own the shares. The goal is to profit from an increase in price by selling later at a higher price (or holding to gain dividends). This is the standard way investors express optimism about a stock’s future. The idea described in selling a stock in anticipation of a rise doesn’t fit, because you’d be acting on a bet that prices will go up by letting go of the asset now, which isn’t how a long position works. Holding cash isn’t a stock position at all. Shorting a stock to profit from a decline is the opposite of being long: you’re betting prices will fall.

Taking a long position means you expect the stock’s price to rise and you buy it now to own the shares. The goal is to profit from an increase in price by selling later at a higher price (or holding to gain dividends). This is the standard way investors express optimism about a stock’s future.

The idea described in selling a stock in anticipation of a rise doesn’t fit, because you’d be acting on a bet that prices will go up by letting go of the asset now, which isn’t how a long position works. Holding cash isn’t a stock position at all. Shorting a stock to profit from a decline is the opposite of being long: you’re betting prices will fall.