Axe (in securities trading)

Definition

An “axe” (or “axe to grind”) is a trader’s interest or motivation to buy or sell a security they already hold. It often reflects a desire to hedge, liquidate, or otherwise manage an existing position. Traders commonly keep their axes private to avoid others exploiting that information.

Origin and meaning

The phrase derives from “axe to grind,” meaning an ulterior motive. In markets it originally described intentions around bond positions but now applies to all types of securities. In conversation, asking whether someone “has an axe” means asking if they intend to buy or sell a specific security.

How traders use the term

• Indicating a desire to hedge exposure (e.g., buying put options when holding a long position).
• Signaling intent to liquidate or accumulate a large position.
• Describing a preference for making or taking particular trades linked to existing holdings.

Practical examples

• A trader with a large holding shops for quotes intending to sell. If the counterparty doesn’t know about the seller’s axe, they may give an unfavorable quote or be disadvantaged.
• A trader long a stock who fears a near-term decline might have an axe for buying short-term put options to hedge downside risk.
• Traders with mutual rapport may disclose axes to find offsetting interests and execute mutually beneficial trades.

Why axes are kept private

Revealing an axe can lead other market participants to:
– Offer worse prices.
– Withhold liquidity to pressure the axe-holder.
– Exploit the known intent for their own gain.

Keeping the axe concealed helps preserve bargaining position and execution quality.

Distinction from “ax”

“Axe” (interest/motivation) is different from “ax,” which can refer to a market maker or a party central to a security’s price action.

Key takeaways

• An axe signals a trader’s planned action regarding a security they hold.
• It can reflect hedging, liquidation, accumulation, or strategic positioning.
• Disclosure of an axe can harm the trader’s execution, so traders often keep it private.
• The concept applies across asset classes, not just bonds.