The ‘modus operandi’ of commodity futures includes the method of
working which is being followed. It also includes the factors and concepts,
which affect the smooth functioning of the markets, are discussed
Types of Futures Positions
The different types of futures contract position are: -
Open position
The trader exploits a view on the economic or technical factors
affecting a market by taking a position in a single contract, usually the most
liquid or ‘front month’ contract.
Spreads
Spread is the term used when, a client buys one contract while
simultaneously sell another. They are:
Intra market
spreads
The trader exploits a view
on the relative pricing of 2 futures contracts of the same contract type by
buying one futures contract for a specific expiry date and simultaneously
selling another contract with a different expiry date. .
E.g. buying silver and selling gold.
Inter market
spreads
The trader exploits a view
on the relative pricing of 2 futures contracts of different contract types by
buying a future contract in one market and simultaneously selling a futures
contract, usually of the same maturity, in a different futures market.
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