Futures Spread Trading

Since its establishment online trading has become very popular, which is the result of the market development, constantly growing trading technologies and the increase of trading volumes. Someone could hardly imagine that trading would develop in such a speed and would become one of the most popular activities after 20 years.

Online Trading: Futures Spread Trading

Online trading implies applying various trading strategies that are intended for maximizing the profits and decreasing the risks of losing the invested funds. One of such trading strategies has become spread trading that is applied to various financial instruments that from the trader's perspective are interrelated. It is worth to mention that the instruments can be both from the same financial sectors and from completely different markets.

The essence of spread trading is opening both long and short positions with similar trading instruments simultaneously. The profit is formulated from the widening or narrowing of the spread (depending on the position direction), which can be more precisely said that is the change of values of the traded instruments. Let us not forget that we deal with two separate positions.

Spread trading, as mentioned above, is used for various instruments, among which futures contracts are.

Types of Spread Trading for Futures Spread Trading

When talking about the types of spread trading, we may distinguish three of them: Intra–market, Inter – market and Inter – commodity spreads. Intra – market type of trading is very popular in futures trading and is often called calendar spread, since trader opens long and short position on the same financial instrument with various delivery months. In this case the trader will make profit only in case the long position will increase faster than the short one or it will fall in price more slowly.

Inter – market spread trading implies buying a futures contract at one market and simultaneously selling it in another one, or vice versa. The last type, which is as popular as intra – market spread trading is inter – commodity spread which means simultaneous purchase and sale of futures contracts on various, but interrelated commodities.

To summarize, there are many trading strategies that are used by traders to maximize the profit and minimize the risks. Spread trading is an interesting example of such a strategy that may result in stable profits.

IFC Markets is a leading innovative financial company, offering private and corporate investors wide set of trading and analytical tools. The company provides its clients with Forex and CFD trading through its own-generated trading platform NetTradeX, which is available on PC, iOS, Android and Windows Mobile. The company also offers MetaTrader 4 platform available on PC, Mac OS, iOS and Android. You may compare the advantages of both platforms.