Outright Futures Position
Outright Futures Position
Understanding an Outright Futures Position
An Outright Futures Position is an essential term in the world of trading. Whether you're a seasoned investor or a beginner, gaining a thorough understanding of this term can provide a significant edge in trading strategies. An Outright Futures Position refers to the direct purchase or sale of a futures contract. It's a single, standalone position that an investor might take in the futures market, without any offsetting positions.
Breaking Down an Outright Futures Position
To understand what an Outright Futures Position is, you first need to know what futures trading involves. Futures trading is a legal agreement to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future. An Outright Futures Position means taking a singular long (buy) or short (sell) position in this kind of contract. The key here is that it is 'outright' - you have an open position in just one futures contract with no other mitigating or hedging strategy in place simultaneously.
Outright Long vs Outright Short Positions
Depending on the trader's market prognosis, an Outright Futures Position can either be a long or short position. An Outright Long Position means that the trader has bought a futures contract with the expectation that prices will rise in the future. In contrast, an Outright Short Position implies that the trader has sold a futures contract anticipating a price drop in the future. In both situations, the trader holds the position until the expiration of the contract or until they decide to offset it with an opposite transaction.
Why Choose an Outright Futures Position?
Why would a trader choose to have an Outright Futures Position? This strategy is commonly chosen for its simplicity. The trader only needs to focus on the price movements of one commodity or instrument. It can also provide higher potential returns. However, bear in mind that higher potential returns also come with higher risks. An Outright Futures Position does not have any hedging, so it is fully exposed to price fluctuations.
