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+Chapter 35: Futures Option Strategies for Futures Spreads 701 
+In some cases, the exchanges recognize frequently traded intermarket spreads 
+as being eligible for reduced margin requirements. That is, the exchange recognizes 
+that the two futures are hedges against one another if one is sold and the other is 
+bought. 
+These spreads between currencies, called cross-currency spreads, are so heavi­
+ly traded that there are other specific vehicles - both futures and warrants - that 
+allow the speculator to trade them as a single entity. Regardless, they serve as a prime 
+example of an intermarket spread when the two futures are used. 
+In the example above, assume the outright speculative margin for a position in 
+either currency future is $1,700 per contract. Then, the margin for this spread would 
+probably be nearly $1,700 as well, equal to the speculative margin for one side of the 
+spread. This position is thus recognized as a spread position for margin purposes. The 
+margin treatment isn't as favorable as for the intramarket spread (see the earlier soy­
+bean example), but the spread margin is still only one-half of what one would have to 
+advance as initial margin if both sides of the spread had to be margined separately. 
+Other intermarket spreads are also eligible for reduced margin requirements, 
+although at first glance they might not seem to be as direct a hedge as the two cur­
+rencies above were. 
+Example: A common intermarket spread is the TED spread, which consists of 
+Treasury bill futures on one side and Eurodollar futures on the other. Treasury bills 
+represent the safest investment there is; they are guaranteed. Eurodollars, however, 
+are not insured, and therefore represent a less safe investment. Consequently, 
+Eurodollars yield more than Treasury bills. How much more is the key, because as 
+the yield differential expands or shrinks, the spread between the prices of T-bill 
+futures and Eurodollar futures expands or shrinks as well. In essence, the yield dif­
+ferential is small when there is stability and confidence in the financial markets, 
+because uninsured deposits and insured deposits are not that much different in times 
+of financial certainty. However, in times of financial uncertainty and instability, the 
+spread widens because the uninsured depositors require a comparatively higher yield 
+for the higher risk they are taking. 
+Assume the outright initial margin for either the T-bill future or the Eurodollar 
+future is $800 per contract. The margin for the TED spread, however, is only $400. 
+Thus, one is able to trade this spread for only one-fourth of the amount of margin 
+that would be required to margin both sides separately. 
+The reason that the margin is more favorable is that there is not a lot of volatil­
+ity in this spread. Historically, it has ranged between about 0.30 and 1.70. In both 
+futures contracts, one cent (0.01) of movement is worth $25. Thus, the entire 140-
+cent historic range of the spread only represents $3,500 (140 x $25). 
+(