What Is a Bull Position?
A bull position, also known as a long position, is one where the investor profits when the price of the investment rises. The expression "being bullish" is the optimism that the value of the asset will increase. When a bullish person buys an asset, they "go long."
Key Takeaways
- A bull position is one where the investor profits when the price of the investment rises.
- The term bull position is synonymous with the term long position.
- A bull position is a buy-and-hold investment approach and involves buying stocks and holding them for a long period.
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How Bull Positions Work
An investor has a bull position when they buy a security and expect its price to rise in the future. Bull positions are the most well-known type of position and are typical of buy-and-hold investment strategies.
The buy and hold approach involves buying stocks and holding them for a long period, regardless of whether the price rises or falls in the short term. To be comfortable remaining invested for the long term, buy and hold investors often carry out extensive research into the fundamentals of the stocks in which they trade.
A bull position is the opposite of a bear position. While a bull position is one where the investor expects the price to rise, a bear position is one where the investor expects its price to fall.
These bear positions are also known as short positions because they are commonly executed by short selling the security in question.
The terms bull position and bear position are synonymous with the terms long position and short position, respectively.
Bear positions are arguably more risky than bull positions because they require the investor to assume unlimited potential risks in exchange for limited potential rewards. For example, if an investor enters into a bear position on a stock trading at $30, the most they can gain is $30 per share, while the most they can lose is infinite since the stock can theoretically rise in price indefinitely.
In addition to taking bull or bear positions in stocks directly, investors can also use options. Call options give the investor the right without obligation to buy 100 shares of a particular stock at a specified price, known as the option’s strike price.
Options can be purchased at a market price that incorporates a premium paid to the option seller. The option can be exercised up until a specified expiration date. Call options can provide flexibility, lower initial costs, and the potential for larger gains. On the other hand, they lose their value if they are not exercised before their expiration date.
Example of a Bull Position
Emma is a buy-and-hold investor who is bullish about the prospects of ABC Corporation. After thoroughly reviewing ABC’s financial statements, management team, and industry prospects, she decides to adopt a bull position in ABC shares. As such, she purchases 100 shares of its stock at $20 per share. As a buy-and-hold investor, she expects her shares to rise above $20 in the long term and is unconcerned if the share price drops below $20 in the short term.
What Is a Bull Market?
A bull market is the condition of afinancial marketin which prices are rising or are expected to rise and is a leading indicator of economic expansion.
What Factors Determine a Bull Position?
An investor will often use financial data to determine whether to take a bull position. Indicators may include market indexes such as the , specific industries, entire asset classes such as real estate or commodities, and even individual stocks.
What Is a Bear Market?
A bear market experiences prolonged price declines often characterized by a fall in securities prices of 20% or more from recent highs amid widespread pessimism and negative investor sentiment.
The Bottom Line
A bull position, also known as a long position, is one where the investor profits when the price of the investment rises. A bull position is the opposite of a bear position, where the investor expects its price to fall. An investor will often use financial data, like the S%P 500, to determine whether to take a bull position.
