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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 ?
Offset can either be direct or indirect to the primary defense contract; the former being where the offsetting investment creates 'defense' production capacity, often involving technology transfer, whilst the latter has regard to investment into the civil sectors of the buyer government's host economy.
Offset has grown in popularity since the 1970s, such that there are now over 130 countries worldwide with some form of offset policy (Behera, 2015, p.
Industrializing countries view offset policies in a positive light, but their importance can be over-stated.
Another major criticism of offset is that it whiffs of intrigue and corruption (Transparency International, 2010, pp.
Developing states have come to view offset as a catalyst for industrial development, more effective than either import substitution or foreign direct investment, because the recipient country's offset authority can exert relatively greater leverage to extract meaningful technology transfer.
Nevertheless, due to the tightness of market conditions, smaller contracts will still prove attractive to overseas vendors, and, offset will inevitably be a prerequisite for closing the deal.
Defense offsets, like defense procurements as a whole, pose an
Additionally, offsets constitute a high percentage of the value of
countries such as Poland, Hungary, Greece, and Portugal make offsets an
only one of several criteria, (35) but even if offsets have relatively
matched, offsets became a key deciding factor in the procurement.
and offsets are located in regions dealing with significant corruption.