Axe

DEFINITION of 'Axe'

The interest that a person or trader shows in buying or selling a financial security. There are many reasons why someone would have a particular interest in a security. If a trader holds a long position but has short-term concerns, that trader's "axe" toward short-term put options may be significant. Also used as a colloquial expression to indicate job cuts or layoffs.

BREAKING DOWN 'Axe'

The term "axe" may be derived from the phrase "axe to grind," which means to possess an ulterior motive or selfish aim. For example, consider a situation where trader A has a large position in a stock, and other market participants have no knowledge of this trader's position. If trader A shops around for quotes with the intention of unloading part, or all, of his or her long position, trader B, who makes a price quote to trader A, would be at a disadvantage if he or she is unaware that trader A has an axe with regard to this specific stock.

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