What It Means
Long means you've bought an option and hold the right it gives you. Short means you've sold (written) an option and taken on the obligation instead, not the right. This applies separately to calls and puts, so there are four possible positions, not two.
How It Works
A long call is bullish: you've paid a premium for the right to buy, and you profit if the price rises. A short call is bearish to neutral: you've collected a premium for the obligation to sell if exercised, and you profit if the price stays flat or falls. A long put is bearish: you've paid for the right to sell, and you profit if the price falls. A short put is bullish to neutral: you've collected a premium for the obligation to buy if exercised, and you profit if the price stays flat or rises.
Warning
Don't assume "short" always means a bearish trade. A short put is a bullish-to-neutral position — you're the one on the hook to buy if the price falls, so you want it to hold up or rise instead.
Related Terms
- Call Option — can be held long or short
- Put Option — can be held long or short