An offset involves assuming an opposite position in relation to an original opening position in the securities markets. 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 an opposite transaction that eliminates the delivery obligation of the physical underlying.
The goal of offsetting is to reduce an investor's net position in investment to zero so that no further gains or losses are experienced from that position.
An offset can refer to the case where losses generated by one business unit are made up for by gains in another. Similarly, firms may also use the term in reference to enterprise risk management where risks exposed in one business unit are offset by opposite risks in another.