The impact of calendar spread orders on price.
Hi, I would like to know what impact calendar spread orders have on the price of the outright futures contracts included in the spread, if any? As it is possible to sell/buy a spread, and then close the position by legging in or out with the outright contracts or vice versa.
Also how do calendar spread orders affect the volume reported in the relevant outright contracts?
Thanks
You're in my domain. Yes... you can get create synthetics spreads by legging it using the outright but you may be exposed to legging risk but you may get a better price but to be safe, use the spreads to execute unless you know what you're doing
Negative spread = front leg trading lower than second leg = market in contango
If you buy the spread, you will execute two legs at once and vice versa... sometimes spreads are more liquid
Traders should spread legs, not leg spreads
Thanks for the quick response.
Do you know how and if spread transactions show up in the outright's time and sales window?
And if they affect the supply and demand of the outright?
yes, the volume shows up in total volume traded no, spread trades don't (usually) have a significant effect on outright prices.
Thanks for the reply!
"Buying of the calendar spread would depress the front and lift the back."
Then would the individual legs of the spread show up in the Time and Sales window of the relevant outrights, affecting the supply and demand?
Thanks for the response.
[/quote] Buying of the calendar spread would depress the front and lift the back.
Then would the individual legs of the spread show up in the Time and Sales window of the relevant outrights, affecting the supply and demand the outrights?
Yup. Listed futures spreads (calendars or x-asset) are just execution placeholders. When something trades, it gets broken down and changes the prices of the individual legs.
I'm not following.
Is the OP referring to using Options to initiate a calendar spread on an underlying Futures contract?
OR
Is the OP referring to using Futures contracts to initiate a calendar spread?
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