What an Outright Rates Trade Means

Summary

In rates trading, an outright position is a trade in an instrument taken on its own, rather than as one leg of a broader paired or hedging structure. When a trader requests a price for a swap, a dealer may ask whether the trade is outright to understand whether another instrument is part of the intended transaction. If the trader plans to trade one swap against another, the dealer can price both legs together.

The term can also describe the purpose of a position in a portfolio. Calling a swap outright signals that it expresses a standalone view rather than serving as a hedge. The explanation is qualitative and does not specify how the term is used in every rates market or how a dealer would handle more complex multi-instrument trades. In context, it distinguishes a directional position from a leg whose risk is linked to another trade.

Key ideas

• An outright rates trade is taken as a standalone position.
• A trade paired against another instrument is not described as outright in this usage.
• Dealers may ask whether a request is outright to determine whether to price linked instruments together.
• An outright position in a portfolio expresses a view rather than serving as a hedge.

Tags

# what does "outright" mean in rates world?


# what does "outright" mean in rates world?












For example, what does "outright" mean in outright OIS swap? Another similar question, what does "USD fedfund is marked as outright" mean? Thank you

## Answer by DataAdventurer (score 2)

https://quant.stackexchange.com/a/75638

When trading derivatives via "voice" sometimes you got asked if the position is outright. The intention behind this is to understand if your trade idea and your request is part of a larger construction.

Simply speaking: If you ask me for a bid/ask for X I'll might ask you if this trade is "outright". Your reaction could be "no i'd like to trade X vs. Y as a pair trade" Then I would price you both instruments at the same time.

A different case could be if you had a fixed income portfolio (consisting from swaps and bonds) and the risk manager asks you "why do you have swap X open?". Your answer could be "This is an outright trade". Therefore the RM knows that this position is not for hedging purposes.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.