Index calendar Spreads
- Thread starter alankaush
- Start date
- Tags calendar spreads
Within calendar spread, there are two types of positions you can take: Bull or bear
Lets get started with Bull Spreads.
Bull Spread:
Bull Spreads are futures positions consisting of being long a near term contract and then short a further term contract, profiting when the price of the underlying asset goes up.
So for bull spread, you will buy Oct Series and Sell Nov Series Nifty Futures
When to take Bull Spread and how do you benefit from same:
When you are bullish on an asset, you would typically go long on its futures contracts in order to reap a leveraged profit when the price of the underlying asset rises. This is known as an "Outright Position". A Bull Spread is formed when you go short on longer term futures contracts on the same underlying asset on top of the nearer term long futures position that you are already holding.
Actually, when you place a futures spread, you are taking on the risk in the pricing difference between the long and short futures contracts rather than a simple directional risk in one futures contract. This puts you in the place of both a speculator as well as a hedger, speculating on the price difference and hedging against risk at the same time, which is now known as taking the position of a "Spreader"
How do bull spread make money:
Unlike outright futures trading positions which make a profit only when the futures contracts that you own appreciates in value, futures bull spreads profit when:
1. When the long leg rises and short leg falls.
2. When the long leg rises and the short leg remained unchanged.
3. When the long leg rises and short leg rises at a lower rate.
4. When the short leg falls faster than the long leg.
5. When the long leg remains unchanged and short leg falls.
When To Use Futures Bull Spreads
1. When the price spread between near term futures contracts and further term futures contracts are expected to narrow down in a normal market.
2. When the price spread between near term futures contracts and further term futures contracts are expected to widen in an inverted market.
3. Any market condition which leads to near term futures contracts rallying against further term futures contracts. An example of such a situation includes a short term lack of supply which pushes up short term demand per unit and price.
Lets get started with Bull Spreads.
Bull Spread:
Bull Spreads are futures positions consisting of being long a near term contract and then short a further term contract, profiting when the price of the underlying asset goes up.
So for bull spread, you will buy Oct Series and Sell Nov Series Nifty Futures
When to take Bull Spread and how do you benefit from same:
When you are bullish on an asset, you would typically go long on its futures contracts in order to reap a leveraged profit when the price of the underlying asset rises. This is known as an "Outright Position". A Bull Spread is formed when you go short on longer term futures contracts on the same underlying asset on top of the nearer term long futures position that you are already holding.
Actually, when you place a futures spread, you are taking on the risk in the pricing difference between the long and short futures contracts rather than a simple directional risk in one futures contract. This puts you in the place of both a speculator as well as a hedger, speculating on the price difference and hedging against risk at the same time, which is now known as taking the position of a "Spreader"
How do bull spread make money:
Unlike outright futures trading positions which make a profit only when the futures contracts that you own appreciates in value, futures bull spreads profit when:
1. When the long leg rises and short leg falls.
2. When the long leg rises and the short leg remained unchanged.
3. When the long leg rises and short leg rises at a lower rate.
4. When the short leg falls faster than the long leg.
5. When the long leg remains unchanged and short leg falls.
When To Use Futures Bull Spreads
1. When the price spread between near term futures contracts and further term futures contracts are expected to narrow down in a normal market.
2. When the price spread between near term futures contracts and further term futures contracts are expected to widen in an inverted market.
3. Any market condition which leads to near term futures contracts rallying against further term futures contracts. An example of such a situation includes a short term lack of supply which pushes up short term demand per unit and price.
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