Outright Futures Position


DEFINITION of 'Outright Futures Position'

A long or short trade on an underlying futures contract that has the potential for unlimited profit, but also carries the risk of unlimited losses. Outright futures are also called naked futures because they leave the investor highly exposed. To reduce risk, the investor may choose to purchase a protective, offsetting option or the underlying security itself.

BREAKING DOWN 'Outright Futures Position'

An example of a financial instrument an investor might choose, instead of an outright futures position, is a synthetic long put option. Investors might purchase this type of option when the price of a commodity is expected to drop and they want unlimited potential profit but limited risk. The synthetic will also have much lower up-front costs than an outright futures position. Another alternative to an outright futures position that can sometimes carry less risk is to take a spread position.

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  1. What does "outrights" mean in the context of the FX market?

    The term "outrights" is used in the forex (FX) market to describe a type of transaction in which two parties agree to buy ... Read Full Answer >>
  2. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  3. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  4. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  5. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  6. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>

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