1 hour ago
1
Key takeaways
- Equal long and short positions normally cancel their directional exposure.
- Opening both sides and later closing the winner turns the remaining trade into a directional bet.
- Trading fees, spreads, slippage and funding can turn a flat result into a loss.
- A hedge can still fail when its two sides use separate collateral.
- Arbitrage targets a spread, not certainty.
No, the two positions normally cancel each other
A long position gains value when an asset’s price rises. A short position gains when the price falls. Opening both at the same price and with the same position size does not create two independent opportunities to profit. It creates two opposing trades.
Consider a simplified example in which Bitcoin trades at $100,000:
- A trader opens a $10,000 long.
- The trader also opens a $10,000 short.
- Bitcoin then rises by 10% to $110,000.
Ignoring costs, the long gains approximately $1,000 while the short loses approximately $1,000. The combined directional result is zero.
If Bitcoin falls by 10% instead, the positions reverse roles. The short gains roughly $1,000 and the long lo...
English (US)