For any sequence, the output color space defines the color space you want to monitor (either via the program monitor and internal video scopes or via Transmit) and render to. Every program has specific requirements for which format it needs to be output to, either imposed by the client, by the streaming service you’re uploading to, by a distribution company, or by a broadcast organization. Color management helps you to meet this requirement in a world where HDR and SDR deliverables are both regularly requested.
If you use an external display connected to a Transmit-compatible video output interface, the best practice is for your external display to be set to match your sequence’s output color space.
Unlike the working color space, which should never be changed once you’ve started adding visual effects and color adjustments to the sequence, you can change the output color space any time you want.