Gross vs net exposure — and why they're not the same risk
Gross exposure is the sum of the absolute size of every position: longs and shorts added together, signs ignored. It answers "how much capital do I have working in the market?" and it's what your funding and fees are charged on. Net exposure is longs minus shorts — it answers "which way am I actually betting, and how hard?" These two numbers can be wildly different. A $10,000 long and a $10,000 short give you $20,000 gross exposure but $0 net: fully deployed, yet pointing nowhere. Net direction is not the same as total risk — you can be flat directionally while still carrying a lot of position-specific and liquidation risk on both legs.
Net % of equity, and the market-neutral idea
Dividing net exposure by your account equity tells you how leveraged your directional bet is. Net exposure equal to your equity is 100% net long — a 1% market move moves your account roughly 1%. Net exposure at twice your equity is 200% net long, using leverage, and a 1% move swings you about 2%. When longs and shorts roughly cancel, net exposure sits near zero and you're market-neutral: your P&L then depends on which positions outperform which, not on whether the whole market goes up or down. That's the whole point of a pairs or basket hedge — you keep the relative bet and strip out the market direction. The catch: you still pay funding and fees on the full gross exposure, so neutral is not free. Pair this read with the portfolio heat calculator to see how much you'd actually lose if stops hit, and size each leg with the position size calculator.
How to use it
1. Optionally enter your account equity so the tool can express net exposure as a percentage.
2. Add a row for each open position — its notional dollar size and whether it's long or short.
3. Read your gross exposure, net exposure, net % of equity and long:short ratio, plus a one-line verdict on which way your book leans. New to the terms? Start with the learn hub.
FAQ
What's the difference between gross and net exposure? Gross is longs plus shorts (absolute sizes) — total capital deployed. Net is longs minus shorts — your directional bet. A balanced long/short book can have large gross exposure but near-zero net exposure.
What does net % of equity tell me? It's how leveraged your directional bet is. 100% means a 1% market move moves your account about 1%; 200% means about 2%. It's the fastest way to catch yourself drifting more directional than you meant to.
What is market-neutral? Net exposure near zero: longs and shorts cancel, so your result depends on relative performance between positions rather than on the market's overall direction. You still pay funding and fees on the full gross size.