Files
ollama-model-training-5060ti/training_data/curated/text/61f94bcb2771ba05547fb396d5fa32c363bed9f4b1f8d29385e9267241014d51.txt

35 lines
2.1 KiB
Plaintext
Raw Blame History

This file contains invisible Unicode characters
This file contains invisible Unicode characters that are indistinguishable to humans but may be processed differently by a computer. If you think that this is intentional, you can safely ignore this warning. Use the Escape button to reveal them.
700 Part V: Index Options and Futures
occurred. While it is unlikely that the spread would actually widen to historic highs,
it is certainly possible that it could widen 25 or 30 cents, a profit of $1,250 to $1,500.
That is certainly high leverage on a $500 investment over a short time period,
so one must classify spreading as a risk strategy.
INTERMARKET FUTURES SPREADS
Another type of futures spread is one in which one buys futures contracts in one mar­
ket and sells futures contracts in another, probably related, market. When the futures
spread is transacted in two different markets, it is known as an intermarket spread.
Intermarket spreads are just as popular as intramarket spreads.
One type of intermarket spread involves directly related markets. Examples
include spreads between currency futures on two different international currencies;
between financial futures on two different bond, note, or bill contracts; or between a
commodity and its products - oil, unleaded gasoline, and heating oil, for example.
Example: Interest rates have been low in both the United States and Japan. As a
result, both currencies are depressed with respect to the European currencies, where
interest rates remain high. A trader believes that interest rates will become more uni­
form worldwide, causing the Japanese yen to appreciate with respect to the German
mark.
However, since he is not sure whether Japanese rates will move up or German
rates will move down, he is reluctant to take an outright position in either currency.
Rather, he decides to utilize an intermarket spread to implement his trading idea.
Assume he establishes the spread at the following prices:
Buy I June yen future: 77.00
Sell I June mark future: 60.00
This is an initial differential of 17.00 between the two currency futures. He is
hoping for the differential to get larger. The dollar trading terms are the same for
both futures: One point of movement (from 60.00 to 61.00, for example) is worth
$1,250. His profit and loss potential would therefore be:
Spread Differential
al a Later Date Profit/Loss
14.00 $3,750
16.00 - $1,250
18.00 + 1,250
20.00 + 3,750