Closed Position

A closed position is a trade that has been fully exited, with all buying or selling completed. Once closed, the position no longer carries market risk, and the profit or loss is realised. Closing a position involves selling an asset you had bought (closing a long) or buying back an asset you had short-sold (closing a short).

What Is a Closed Position?

A trade is “closed” when the offsetting transaction has been executed. The realised profit or loss is locked in at this point, regardless of where the price goes afterwards.

– **Closing a long position**: you sell the shares or contract you had bought
– **Closing a short position**: you buy back the shares or contract you had sold short

Closed Position vs Open Position

| Feature | Open Position | Closed Position |
|———|————–|—————-|
| Trade status | Active | Completed |
| P&L | Unrealised | Realised |
| Market risk | Present | None |
| Margin required | Yes (for derivatives) | No |

How Positions Are Closed

**Intentional closure**: the trader manually exits the trade based on a target, stop-loss, or change in view.

**Automatic closure**: stop-loss orders, target orders, or margin calls result in automatic position closure.

**Expiry**: futures and options positions are automatically closed at expiry.

**Settlement**: in some markets, positions are closed and cash-settled at the settlement price.

Tax Implications

When a position is closed, the gain or loss is realised and becomes taxable:
– Short-term capital gains (shares held under 1 year): 15%
– Long-term capital gains (shares held over 1 year): 10% above Rs 1 lakh per year
– Speculative income (intraday equity, futures): taxed as business income at slab rate

Practical Example

Neha bought 200 shares of HDFC Bank at Rs 1,600 per share (total cost: Rs 3.2 lakh). She sells all 200 shares at Rs 1,780 per share (Rs 3.56 lakh). This closes her position. Her realised profit is Rs 36,000. Since she held for 8 months (short-term), this is taxed at 15% = Rs 5,400.

Key Takeaways

– A closed position is a fully exited trade where profit or loss is realised
– Closing a long means selling what you bought; closing a short means buying back what you sold
– Once closed, the position carries no market risk and requires no margin
– Taxes are triggered when a position is closed (realised gains/losses)
– Stop-loss orders, target orders, and expiry are common automatic position closure mechanisms