Investor's wiki



What Is a Book?

A book is a record of the relative multitude of positions held by a trader. The book shows the total amount of long and short positions that the trader has attempted. Institutional traders keep a book to work with trades for their customers and to monitor for risk and opportunities. This might remember trading the positions for the book with customers or endeavoring to capture the bid/ask spread.

  • The book is likewise alluded to as a trading book. This ought not be mistaken for a order book, which gathers the current bids and offers in a security.
  • "Book" may likewise allude to an accounting ledger (i.e., the practice of bookkeeping) and subsequently connects with a firm's accounting value, known as book value.
  • A book may on the other hand allude to a professional's client list (i.e., their book of business), frequently associated with financial professionals like advisors, planners, insurance agents, or accountants.

Understanding the Trading Book

A trader with a simple book might hold just two positions: say one long position of XYZ stock with 1,500 shares and a short position of 1,700 shares in ABC stock. Keeping a cutting-edge book permits a trader to know about his positions and the risk exposure connected with those positions.

A trader will then, at that point, monitor these positions and search for opportunities to trade their positions against client orders. This might furnish the client with a better price than different bids/offers accessible, and will likewise permit the trader to offset their very own portion position. They may likewise use their positions to capture the bid/ask spread. For instance, on the off chance that the trader can buy and the bid and a client is buying from them at the ask, they can capture the spread for a small profit.

Numerous traders make a market in a specific stock, bond, futures contract, currency pair, or options market, and that means that they work with transactions for customers. Traders utilize their firm's capital to keep a book of long and short positions and give a bid and ask price to investors. The bid is the highest advertised price to buy a security, while the ask or offer is the most minimal advertised to sell a security.

The positions inside the book will change in value as the security prices rise and fall. This will impact the profitability of the trader and the firm they work for.

Retail traders may likewise allude to their own positions as a book, albeit the term is generally associated with institutional traders or traders who have clients.

Alternate Ways the Term "Book" Is Used in Finance

The term book is utilized in numerous ways in a financial or business setting.

The term book can allude to book value, which is an accounting term used to portray a key measurement of company value. Book value is connected with the balance sheet formula of assets - liabilities = equity.

Book value per common share (BVPS) of stock is a ratio that measures the amount of equity the company keeps up with per share of common stock. In theory, on the off chance that the company sold its assets and paid off its all liabilities, the amount remaining would be all equity. In the event that there is greater equity accessible per common share, each share is hypothetically more significant to a stockholder. Yet a few stock prices trade below book value, while others trade at ordinarily book value, so it is a helpful measurement however is just a single factor to consider while pursuing a stock-related trading choice.

For traders, the order book addresses the current depth and liquidity in a market by showing the bids and offers, along with their sizes, in a security. An order book may likewise allude to the rundown of a firm's customer orders that will be filled in later months. The dollar value of the order book is an indication of future sales and the growth possibilities of the business. In the financial markets, an order book is all the buy and sell orders currently submitted in a security.

A book can likewise allude to the customer list kept up with by a specific financial professional, salesperson, or small business owner. This book of business is many times the key profit center for such people.

Illustration of a Position Book in the Stock Market

Expect a floor trader trades Apple Inc. (AAPL) stock. In this case, their book just comprises of one stock, yet the book must in any case precisely show the number of shares long or short the trader that has. For an active trader, this could change substantially over the course of the day. The book will likewise commonly show the dollar value of the position(s), as this will assist the trader with dealing with their risk and capital.

The trader might open the day with a long position of 10,000 shares. Contingent upon their perspective on whether the price will rise or fall overall they might incline toward buying or selling more. For instance, assuming they are negative about the possibilities of the day, on the off chance that buy orders are raising a ruckus around town, the floor trader might make a move to sell 3,000 shares on the offer. Their book currently shows a long position of 7,000 shares.

The price begins getting more grounded, and the floor trader's view turns more bullish. As the price rises, they might search for opportunities to buy during short-term pullbacks or when the bid is getting hit more regularly. They buy 2,000 shares on the bid. Their book presently shows 9,000 shares long.

As the price rises, they make a move to sell 5,000 shares on the offer into strength, securing in a profit. Their book currently shows 4,000 shares. This occurs all through the trading day, and for the vast majority institutional traders, their book will contain changing positions in numerous stocks or assets.


  • A trading or position book is a forward-thinking record of a trader's vacant positions.
  • The term "book" utilized in this setting is generally utilized in reference to institutional traders who trade the book positions against client orders.
  • Book likewise has several different implications in finance, and can likewise allude to an order book, a rundown of customers, or the book value of a company.