Spread Trading in Single Stock Futures

Perhaps the most interesting, and potentially profitable, tool in forex trading is the spread. Yet in spite of its potential and validity as a trading method, it is not understood by most traders and therefore not generally employed by the trading public. On the other hand, professional traders in the futures and options markets use spreads frequently as vehicles to profitable trading. Why is it that spreads are so poorly understood by the public? The answer here, as in most cases, is a combination of ignorance and fear. One reason for this problem is that a spread involves two opposite positions in the same market or in related markets at the same time. This can be confusing, especially to the new trader.

It seems paradoxical that with the wealth of information avail­able today about forex trading systems and methods, there should exist such a weak spot in market knowledge. I suggest that even futures traders who are familiar with the use of spreads not skip this chapter, as I offer some important points about the use of spreads in SSFs—points that may serve you well in the short as well as the long run.

I What Is a Spread and How Does It Work?

A spread is precisely what its name implies: it involves the purchase of one contract and sale of another contract in different months or in the same or different futures markets, most often simultaneously, in order to profit from the differential strength or weakness between the two contracts or the two different markets. Putting it simply, when you enter a spread, you go long and short either in different contract months of the same market (or SSF) or in two different markets (or SSFs).

As noted earlier, when you enter a forex spread, you buy and sell at the same time; however, you do so in different contract months of the same market or SSF or in the same contract month of two different but related markets or SSFs. By being long and short at the same time, you try to take advantage of the fact that, at times, different contract months of the same SSF or market, or the same contract month of different markets or SSFs, rise and fall at different forex rates of speed or by different amounts.

Forex Conquered. High Probability Systems and Strategies for Active Traders - John L. Person

If this sounds a bit intricate or confusing, consider the fact that conditions affecting the price of June General Motors futures may be considerably different than conditions and factors that may affect the December General Motors futures contract. How so? It's really very simple. Assume that it is now April. Assume also that General Motors (GM) shows strong car sales at the present time with the odds of strong car sales continuing for several months. However, projections looking ahead to December are not nearly as optimistic. In other words, GM expects car sales to be lower in December than they are now.

stock ticker ~ online trading
make money online ~ learn forex
stock symbol ~ forex trader
pick stock ~ forex charts