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A Complete Guide to the Futures mArket
P1 = $0.80, an 80-contract forward/81-contract nearby spread would not be affected by equal price 
changes (e.g., a 10-percent price increase would cause a total 64,800-point change in both legs of the 
spread). As can be seen in this example, a balanced spread will only be possible for extremely large 
positions. This fact, however, does not present a problem, since the distortion is sufficiently small so 
that a 1:1 contract ratio spread serves as a reasonable approximation.
Intracurrency spreads can also be combined to trade expectations regarding two foreign euro-
currency rates. In this case, the trader would implement a long nearby/short forward spread in the 
currency with the expected relative rate gain, and a long forward/short nearby spread in the other 
currency. For example, assume that in February the June/December euro spread implies that the 
June six-month eurodollar rate will be 1 percent above the euro rate, while the June/December JY 
spread implies that the June eurodollar rate will be 2 percent above the euroyen rate. In combina-
tion, these spreads imply that the June euro rate will be higher than the June euroyen rate. If a trader 
expected euroyen rates to be higher than euro rates in June, the following combined spread positions 
would be implied: long June JY/short December JY plus long December euro/short June euro.
T o summarize, intracurrency spreads can be used to trade interest rate differentials in the follow-
ing manner:
expectation Indicated trade
eurodollar rate will gain on given eurocurrency rate 
(relative to rate ratio implied by spread).
Long forward/short nearby
spread in given currency
eurodollar rate will lose on given eurocurrency rate 
(relative to rate ratio implied by spread).
Long nearby/short forward
spread in given currency
eurocurrency rate 1 will gain on eurocurrency rate 2 
(relative to rate ratio implied by spreads in both markets).
Long nearby/short forward spread in market 1 and long 
forward/short nearby spread in market 2