International Trade

Futures spread trading involves the sale of futures contract and buying more offsetting contracts.

A spread tracks the differences between the price futures you are long and the futures you are short, hence, it enables investors benefit more than they would trading in stocks or outright futures.

Spreads trading helps in spreading investment risks since you can own long futures of one kind in a given month, and own short futures of the same kind in another month; this is referred to as intra commodity spread trading.

Investors can also own long futures of one kind and own short futures of another kind which is commonly referred to as inter-commodity trading. The commodities must be related so that movement of prices of the commodities goes to the same direction.

It is easy to trade in spreads, whether you are an experienced investor or a beginner since futures spread trading is considered as a safer way of trading in futures.

Inter-market spreads require only a small margin required for total futures which helps you use your money in the most efficient way. Spread trading also offer greater returns since you are posting fewer margins for the same possible return which are usually higher.

Spreads tend to drift as compared to outright futures; therefore, they can be used to create futures positions partially. When futures drift, you make more money since the futures market is not affected by manipulation.

Spreads trading allows you to trade on a seasonal basis since trends drift on seasonal basis, thus high returns.

Futures spread trading is more predictable than trading in shares or futures trading which explains, why the margins of spreads are low. Spreads are not affected by problems related to lack of liquidity since you can trade in less liquid markets.

Commercial firms have used the spread trade to extend their hedges from on contract month to another, by so doing; they attempt to recover the costs of their inventories.

Most of trade spreads are utilized by large speculators and commercial firms since they are highly knowledgeable about spreads than small speculators.

This is so because small speculators many at times find spread trading complex; they are required to analyze two positions instead of one.

However, these challenges have not barred small speculators since they can improve their profit by trading spreads correctly.

Futures spread trading, has helped traders predict the future movements of prices. This will allow them to make decisions whether to hold on or sell based on the prices signals.

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