Use Of Spreads In The Futures Market

Futures spread are an arbitrage method where the trader takes two positions on the commodity in order to capitalize on any discrepancy in the price. Here the trader trades futures spread and do a unit trade where he takes both a buy and a sell position in the futures market. Spreads is something that is not discussed a lot in the financial market. The spread is a way in which the investors capitalize on the difference in price in the futures market. The contracts are in the same asset class. Those who trade conservatively use the spread strategy as it is also much safer than trading naked futures contracts. You can trade spreads on the automated trading robot. How is spread trading done? The spread trading in the futures market is done in many ways. When a trader takes the opportunity in an interexchange spread trade, he takes a futures position in two different exchanges. They make use of the discrepancy in the prices. The trader buys the contract that is cheaper and sells the contract that is priced higher. The difference is what he pockets. Another way to trade spreads is the calendar spread. Here the trader will buy and sell the futures contract of the same asset but that which has a different expiration time. This lets them take advantage of the increase in volatility over time. The inter-market spread can be also traded where the trader trades contracts that have the same expiration date but is being traded on different assets. The trader is trying to capitalize on the difference in price between the different contracts. Like for example, the trader could belong in gold for the month of January and short in silver for the month of January. This is a strategy that traders use when they feel that there is going to be some significant difference in the price of the assets before the expiration period. Trading in Bitcoin futures The trading in the Bitcoin futures market started in the year 2017 in the month of December. The futures market here too lets the trader benefit from the futures spread opportunity and lets them profit from the volatility in prices. A trader who thinks that the price may go up over a time period will buy the futures contract for a month and sell the contract of two months out at a much higher price. The difference of buying the one month contract and selling the two-month contract lets them take advantage of the trade.