Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

MCX Enabling LTP Based Calendar Spread Trading Facility

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MCX in its today’s circular announced that from 1st April 2015 onwards MCX traders can trade in LTP based calendar Spread Trading. So the traders participating in the spread trade now only need to care about the spread relationship instead of caring about the futures price movements.

What is Calendar Spread?
A calendar spread in the commodity future markets, involves buying a futures contract in one month and selling one in a different month for the same commodity.

The calendar spread trading facilitiy will be available for the following combination of expiry months of the same commodity:

• Near Month and Second available Month
• Near Month and Third available Month
• Second available Month and Third available Month

Symbol Format

First Three characters will represent commodity symbol (Table 1).

• Next Three (Fourth to Sixth) characters will represent the near month
• Next Two (Seventh and Eighth) character will represent the far month
• Last Two characters will be the year of the far month contracts

Commodity Symbol and Name
Spread trading symbol1
Spread trading symbol2

Spread trading symbol3

 
For example the symbol GLDAPRMY15 represents the underlying symbol gold with near month contract as April 2015 and far month contract as May 2015. For a given combination of symbols, trading facility will be available till the date of expiry of the near month.

Bull Spread is buying the near month contracts and shorting the far month contracts. whereas Bear spread is shorting near month contracts and buying far month contract.

spread difference is known as “cost of carry“. This amount includes the costs of insurance, interest and storage of physical commodity, or the money required to “carry” the commodity from one month to another.

A commodity with a low supply with big spreads attracts bull spread traders. And high supply with thin spread attracts bear spread traders and such spread traders are more of a seasonal one.

Download the MCX circular about LTP Based Calendar Spread Trading Facility

Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

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