Three Types of Futures Spreads
Futures spreads trading is considered a more evolved, profitable and less risky futures trading strategy than taking simple long or short positions. Spread is the process of taking long and short positions on two different futures contracts of the same or related underlying commodity. There are three types of futures spreads.
1. Calendar or Intracommodity futures spread: This is also known as Intramarket or interdelivery or horizontal or time futures spread. It is the most basic form of futures spread, where a trader takes long and short positions on futures with the same underlying commodity, but different delivery months. Eg: long October crude oil contract and short December crude oil contract.
2. Intermarket or Inter-commodity futures spread: A trader takes long and short positions on different futures contracts with different but related underlying commodities, and the same delivery month. Eg: long September Wheat and short September Soybeans. Inter-commodity spreads can also be calendar spreads, when the contracts have different maturity periods.
3. Inter-Exchange futures spread: It is a less commonly followed futures spread trading strategy, because of rarity of trading opportunities. In inter-exchange spread trading, a trader takes long and short positions for the same underlying commodity with the same delivery month but traded in different exchanges. Here the trader usually tries to profit from geographical differences and inefficient futures pricing. Eg: long July wheat traded in CBOT and short July wheat traded in KCBOT.
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1. Calendar or Intracommodity futures spread: This is also known as Intramarket or interdelivery or horizontal or time futures spread. It is the most basic form of futures spread, where a trader takes long and short positions on futures with the same underlying commodity, but different delivery months. Eg: long October crude oil contract and short December crude oil contract.
2. Intermarket or Inter-commodity futures spread: A trader takes long and short positions on different futures contracts with different but related underlying commodities, and the same delivery month. Eg: long September Wheat and short September Soybeans. Inter-commodity spreads can also be calendar spreads, when the contracts have different maturity periods.
3. Inter-Exchange futures spread: It is a less commonly followed futures spread trading strategy, because of rarity of trading opportunities. In inter-exchange spread trading, a trader takes long and short positions for the same underlying commodity with the same delivery month but traded in different exchanges. Here the trader usually tries to profit from geographical differences and inefficient futures pricing. Eg: long July wheat traded in CBOT and short July wheat traded in KCBOT.
NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage
posted by Daniel Pipitone at
5:31 AM
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