what is an outright futures position 
an outright futures position is an unhedged futures trade that is taken on its own and is not part of a larger or more complex trade understanding outright futures positionsan outright futures position is a long or short trade that is not hedged from market risk both the potential gain and the potential risk are greater for outright positions than for positions that are covered or hedged in some way an outright position is one that stands on its own and is not part of a larger or more complex trade a profit is made from a long outright futures position if the price rises following the purchase or from a short trade if the price falls after the short is initiated an outright position is one that is a pure long or short bet on the direction of the futures contract hedging or offsetting that position with another position means it is no longer an outright position outright futures are also called naked futures because they leave the investor exposed to market fluctuations to reduce risk the investor may choose to purchase a protective offsetting option an offsetting position in the futures underlying security or an opposite position in a related market hedging or offsetting the risk means it is no longer an outright futures position an outright futures position is inherently risky because there is no protection against an adverse move most traders do not consider trading liquid futures contracts to be excessively risky especially because in most cases it is easy to cover or to sell the position back to the market most speculative positions in the futures market are outright positions however a declining market for an investor holding a long position in a futures contract still has the potential to deliver significant losses in this case holding a put option against the long futures position could cap losses to a manageable amount the trader s profit potential would be reduced by the premium or cost of the option consider it to be an insurance policy the trader hopes not to use traders selling futures short without a hedge face even greater risk since the upside potential for most futures markets is theoretically unlimited in this case owning a call on the underlying futures contract would limit that risk another alternative to an outright futures position that can sometimes carry less risk is to take a position in a vertical spread trade this caps both profit potential and risk for loss and it would be a good choice for a trader that only expects a limited move in the underlying security or commodity while all the above limit risk they also tend to limit or reduce profit many speculative traders prefer outright futures positions because of their simplicity one position and the ability to generate larger profits when a trade is well timed and takes advantage of an ensuing price move outright futures position exampleassume a trader believes that the s p 500 is going to rise over the next several months it is currently july so the trader buys a december contract of the e mini s p 500 listed on the chicago mercantile exchange cme under the symbol es 1the trader uses a limit order to enter a position at 4321 buying one contract this particular futures contract moves in 0 25 increments with four increments called ticks to each point each tick is worth 12 50 in profit or loss and each point is worth 50 4 x 12 50 this position is a pure directional bet on the price of the futures contract rising the trader is not taking any other positions to offset the risk or magnify the profits associated with the position therefore this is an outright futures position assume that in one month the price of the contract is at 4351 the trader is up 30 points or 1500 50 x 30 points less commissions subsequently the price drops to 4311 the trader is down ten points or 500 50 x 10 points investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal 