An offset is a financial market strategy that requires a trader to take an opening position and then take a directly opposite position. For example, if you are long 100 shares of XYZ, selling 100 shares of XYZ would be the offsetting position.

An offsetting position can also be generated through hedging instruments such as futures or options. In the derivatives markets, to offset a futures position a trader enters an equivalent but opposite transaction that eliminates the delivery obligation of the physical product that it represents.

The goal of offsetting is to reduce an investor’s net position in an investment to zero so that no further gains or losses are experienced from that position.

In business, an offset refers to the generation of gains in one business unit that makes up for losses in another unit.