Spreads are an interesting way of trading on widening or narrowing of spreads between two months. For example, if you expect that the spreads between the December contract and the November contract will widen due to a Fed meet outcome, then the best way is to trade long on current month and short on the next month. But that would be double the time, cost and transaction management. That is not optimal. Easier still is to directly buy the spread where you expect the spread to widen or sell the spread the spread where you expect it to narrow. The spread contract also acts as a indicator of future movement of futures prices.
Contract
Best Bid
Best Ask
Volume
LTP Difference
USDINR
SPNOV18DEC18
1000
0.185
0.19
56
5,77,840
0.19
SPNOV18JAN19
1000
0.365
0.4225
300
14,396
0.4025
SPNOV18FEB19
500
0.485
-
-
1,038
0.575
SPNOV18MAR19
1000
0.71
-
-
-
-
SPNOV18APR19
1000
0.71
-
-
-
-
SPNOV18MAY19
1000
0.71
-
-
-
-
SPDEC18JAN19
1000
0.2125
0.2175
300
4,306
0.22
SPDEC18FEB19
100
0.42
0.4375
100
-
-
SPDEC18MAR19
-
-
-
-
-
-
SPDEC18APR19
-
-
-
-
-
-
SPDEC18MAY19
-
-
-
-
-
-
SPDEC18JUN19
1500
0.7125
-
-
-
-
SPJAN19FEB19
250
0.2025
0.215
1000
144
0.21
In the above if you expect the USDINR DEC-Jan spread to widen from 0.2 to 0.25, then you just buy this spread contract and then you can book the profits when your profit target is reached. It is as simple as that.
Spreads are an interesting way of trading on widening or narrowing of spreads between two months. For example, if you expect that the spreads between the December contract and the November contract will widen due to a Fed meet outcome, then the best way is to trade long on current month and short on the next month. But that would be double the time, cost and transaction management. That is not optimal. Easier still is to directly buy the spread where you expect the spread to widen or sell the spread the spread where you expect it to narrow. The spread contract also acts as a indicator of future movement of futures prices.
Contract
Best Bid
Best Ask
Volume
LTP Difference
USDINR
SPNOV18DEC18
1000
0.185
0.19
56
5,77,840
0.19
SPNOV18JAN19
1000
0.365
0.4225
300
14,396
0.4025
SPNOV18FEB19
500
0.485
-
-
1,038
0.575
SPNOV18MAR19
1000
0.71
-
-
-
-
SPNOV18APR19
1000
0.71
-
-
-
-
SPNOV18MAY19
1000
0.71
-
-
-
-
SPDEC18JAN19
1000
0.2125
0.2175
300
4,306
0.22
SPDEC18FEB19
100
0.42
0.4375
100
-
-
SPDEC18MAR19
-
-
-
-
-
-
SPDEC18APR19
-
-
-
-
-
-
SPDEC18MAY19
-
-
-
-
-
-
SPDEC18JUN19
1500
0.7125
-
-
-
-
SPJAN19FEB19
250
0.2025
0.215
1000
144
0.21
In the above if you expect the USDINR DEC-Jan spread to widen from 0.2 to 0.25, then you just buy this spread contract and then you can book the profits when your profit target is reached. It is as simple as that.