What is one implication of positioning trading for a dealer?

Position trading refers to the strategy used by dealers and traders where they maintain a position in a security for a longer duration, anticipating a price change that will be favorable. This approach does involve taking on market risk, as the dealer is exposed to the fluctuations of the market that can lead to potential losses or gains based on the performance of the asset.

When a dealer holds onto inventory in the hope of future price appreciation, they are effectively betting on the direction of the market over a longer time frame. This exposure means that if the market moves adversely, the dealer could suffer losses on the positions held. Thus, the implication of position trading for a dealer fundamentally revolves around the assumption of this market risk, making it the most relevant choice in understanding the consequences of the trading strategy.

Position trading does not guarantee immediate profits as it is subject to market movements. It does not inherently increase customer trust—it largely depends on the dealer's performance and relationship with clients. Finally, while transaction costs can be managed, position trading may not necessarily reduce them, as holding multiple positions can potentially involve higher transaction fees over time.