- If you are long an instrument, you are longing for it to rise. Your delta is positive i.e. in your favor.
- If you are short an asset, you have a shortage for it and hope it depreciates. Your delta is negative.
… That’s my new “cheat-sheet”. Now let’s compare important derivatives:
- I think the meaning of “long eurodollar futures” is non-intuitive. If I long eurodollar futures, I want the expiration-date Libor number to Drop. Suppose today is a week before expiration and today’s Libor is 222 bps, I would long for the rate to Drop to 180 on my expiration date. That would mean my futures’ final price would be 98.2
- If you are long the futures, then I guess you are a fixed-rate lender
- FRA — you buy the FRA (go long) by agreeing to pay the fixed rate. You want the fixed rate (loan-start-date Libor rate) to rise.
- if you buy a FRA then you are a fixed-rate borrower
- IRS — fixed-payer is long a swap. As illustrated in earlier posts, the “oranges” to be delivered to you is the stream of floating interest payments
Q: Look at any financial instrument with a fluctuating price. An instrument not necessarily transferable or tradable, but always bettable. What does it mean if I “long” this instrument?
– i pay a fixed price for it, today or predefined dates. No runaway — i must pay.
– i get the right to demand cash flow from this instrument
– I long this instrument because I benefit from appreciation.
This complicated explanation is needed in the Libor and IRS context.
Simplest example — if I long IBM, i buy the stock and stand to gain if it rises.
Simple example — if I long copper, i buy a copper futures contract at $800 ie I pay this price today, and hope the price at contract expiration is higher.
example — if I long 10-year T bond, i buy a futures contract at $101….
In Libor IRS, I’d say every fixed-payer is long Libor. Let me repeat —
* Fixed rate payer is long Libor.
* You BUY a swap if you are long Libor. 
* you buy a swap if you are short the bond-market 
 because you want bond prices to drop and yield to rise along with Libor.
 because the fixed rate agreed today is based on current Libor. If I go long on Libor, say, the 90-day eurodollar deposit rate, then I enter IR swap
– I pay a fixed rate of 222 bps/year — ie the “price”, computed at current Libor
– I receive a yet-unknown floating rate, hopefully above 222 bps
– I am long Libor therefore I stand to gain when Libor rises