What is exposure?

Exposure in the stock markets is the measure of potential loss or the sum total of money and assets invested in a particular sector of the market or industry. It is the aggregate of all the buy and sell trades that have not yet been settled in the cash segment. The profit and/or loss amount on these trades is yet to be determined and settled on the closed positions. This includes futures and options as well.

In financial terms, exposure is the total amount that a trader may lose if a trade fails. It is the measure of potential loss which is the sum total of the amount invested, liabilities such as loans and outstanding settlements.