Hi,
I was wondering if someone could clear this up for me i haven't been able to find the answer elsewhere. I'm interested in intra-contract (calendar) spread trading on physically delivered futures. I understand that with a normal contango market with positive cost of carry
Bear Market: the calendar spread between the front month and the further month becomes narrower, that is it becomes less negative (assuming they trade at fair value to the cash). So buy the spread, by buying the front sell the back.
Bull Market: the same calendar spread widens, so sell the spread.
But what about under a backward market? Fom my own scribblings is it the case that you just reverse the above? So in a backward market as the spot moves higher then the intracontract spread will tend to fall (become less positive)?
Would be grateful for any help, also any historical examples/anecdotes you could point me in the direction of, that would be great.
Cheers
I was wondering if someone could clear this up for me i haven't been able to find the answer elsewhere. I'm interested in intra-contract (calendar) spread trading on physically delivered futures. I understand that with a normal contango market with positive cost of carry
Bear Market: the calendar spread between the front month and the further month becomes narrower, that is it becomes less negative (assuming they trade at fair value to the cash). So buy the spread, by buying the front sell the back.
Bull Market: the same calendar spread widens, so sell the spread.
But what about under a backward market? Fom my own scribblings is it the case that you just reverse the above? So in a backward market as the spot moves higher then the intracontract spread will tend to fall (become less positive)?
Would be grateful for any help, also any historical examples/anecdotes you could point me in the direction of, that would be great.
Cheers
