Types of futures spreads

For my eSignal screen, I simply type this formula in to have the equity spread displayed.

Source: eSignal -

There are only a few markets in which you’ll see equity spreads. Some of these are: Gold versus Silver, NYMEX energy spreads, CBOT soybean oil versus other grains and some CME FX cross rate spreads.

Overall, this is not an important part of the eBook, but it is something that needs to be mentioned.

Spreads: more risk, less risk?

You’ll often hear people talk about the reduced risk of spread trading. In the majority of cases this is very true spreads to have less risk than outright futures positions.

This does actually make sense. A spread between two calendar months in the same market will in most cases be significantly lower in volatility than that of the underlying market.

Case in point is Soybeans. The first chart below shows August 2007 soybeans over quite an active period. From April to July, the market rallied almost 200 cents then retraced about half

of that in no time. One soybean contract is worth $50 per cent quoted, so a 200 cent move is


Source: eSignal -

Compare this to a Soybean spread chart. The next chart shows August versus March Soybeans. Over the same period in which Soybeans rallied almost 200pts, the spread had a range of about 25pts.

Source: eSignal -

This example is typical of many spreads, but it less applicable to inter-market spreads

(spreading one market versus another).