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Elimination of a long or short position by making an opposite transaction. Related: Liquidation.


To change from a long position to a short position or from a short position to a long position. A long position is ownership of a security, while a short position is debt. Thus, to offset a long position is to sell a security, and to close a short position is to buy out the debt.


The liquidation of a futures or option position by purchasing (for a short position) or selling (for a long position) an equal number of identical contracts so that no further obligation exists.


You offset an options or futures position by taking a second position in a contract with identical terms, buying if you sold initially or selling if you bought initially.

With the offset, you neutralize any potential obligation you had to fulfill the terms of the contract, and you may make a profit or reduce a loss with the transaction.

For example, if you'd sold an equity call option that is close to being in-the-money, you might buy an offsetting call option. That neutralizes your obligation to deliver the underlying stock if the option you sold is exercised.

In a tax context, you can use capital losses to offset an equivalent dollar amount of capital gains, or up to $3,000 in capital losses to offset ordinary income. In either case, the offset allows you to reduce the tax you owe.

Further, banks have the right of offset if a borrower defaults on a loan. That right allows a bank to seize assets in the borrower's deposit accounts with the bank to reduce or eliminate any loss on the loan.

References in periodicals archive ?
The area of carbon management and off-setting is new and evolving fast, and organisations aspiring to practise their CSR principles are well advised to seek advice.
The off-set mortgage is Intelligent Finance's main product and allows consumers to reduce the amount of interest they pay on their mortgage by off-setting it against their savings.
However, Drouhard explains, "The Sandvik folks suggested off-setting the cutters so they were not all turning at the same part of the cut.
3, where he suggested instead that the government initiate a blanket cap of 50 per cent of the entire remuneration package if the aim is to prevent clergy from off-setting all their income with the deduction.
for nearly $30 billion, off-setting a bid from British Telecom.
The cumulative effect of these two largely off-setting events is expected to be that the total size of the mortgage servicing portfolio over the last three months will have remained substantially unchanged.
Off-setting in part these benefits is that by incurring the incremental debt, the company is, in effect, taking an obligation that would have amortized to zero over time (i.