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Investments glossary

Axe

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Quotes of the day:

A homosexual who is honest with himself knows that he and his partner will never become parents together, dRINK, DRUGS AND SEX.

— Paolo Gentili

An axe (or axe to grind) is the interest that a trader shows in buying or selling a security that is typically already on his books. If a trader holds a long position, but has short-term concerns, that trader’s axe toward short-term put options may be significant. Likewise, if a trader has risk exposure to an increase in interest rates, he may have an axe to hedge against that risk. Many times, a trader with an axe will keep that information private because if other market participants become aware of his motivations, they can take advantage of that information by offering unfavorable prices or withholding certain trades in order to exploit the situation.



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