The sum of all long and short position values added together, ignoring direction; a measure of total activity and leverage.
Gross exposure = longs + shorts, as absolute values. A book with $60,000 long and $40,000 short on a $50,000 account has $100,000 gross, or 200% gross exposure.
It matters because both sides can lose. In a short squeeze the shorts rise while the longs fall, and in a liquidity event spreads widen on everything. Gross tells you how much total market surface you are touching, which drives financing costs, margin-utilisation and the damage from a correlation shock.
Read it alongside net-exposure. The pair 200% gross / 20% net describes a market-neutral book with substantial single-name risk; 120% gross / 120% net describes a levered directional bet. These are entirely different portfolios with similar-looking account values.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.
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