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Elimination of a long or short position by making an opposite transaction. Related: Liquidation.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
globally and understand and evaluate how offsets can be used to
objective of Offsets strategy and Policy, successful offsets project
management and negotiation and how we can manage Offsets risks.
The argument of this article is that an offset agreement cannot be merely reduced to a contract ancillary to the defense industry's main acquisition contracts.
To clarify, this article starts by defining the offset agreement.
Basically, an offset agreement is the contract to offset the advantages given to the contractor by the main contract (the acquisition contract).
While on the one hand, the offset agreement helps to mask the financial liabilities of companies, on the other, governments may present advantages granted by offsets as a success, although the price of the acquisition contract (the main contract) may have increased due to the offset agreement.
The properties of the market are important for the ability of the purchasing government to impose its offset terms on the contractor: the acquisition contract should involve large sums.
penalties on suppliers who fail to meet offset commitments.
offset obligations when selling their wares abroad (suppliers), (36) the
governments whose suppliers incur offset obligations (supplier
Market conditions led to "ever-increasing offset demands."