Were spread trading-easy trading strategies to maximize profits

The most trading strategies designed to protect your profits and at the same time losses and risk management. Hedging transactions "Distribution" is one of the these strategies.



Before we in the topic to a brief summary of trade terms. Auction items, either buy or sell a futures contract. This is also called a "long" or "short" open position. If you expect the course, until you expires, then you would buy it to today's prices, and it will be seen as a reversal speculation. If you believe that the price falls, until it expires, on the other hand, you want to sell this contract today and buy back to future price gains from the difference. It is something illogical in the beginning. How can you something to sell, you have in the first place? You sell again a futures contract on bonds issued by your broker and later sell. Its easy, just sounds like a challenge.



Is a small selection:



Let us assume that you a futures contract sold wheat for $8.00 per bushel in June to October. There are a minimum of the Treaty and can accumulate it at 10,000 you this example to keep. You, the price to $7.00 taken down per bushel in September. This is $1.00 profit on each litre to $10,000 (including fees).



To understand the concept of "participation" with the help of another example:



The current month is March and purchas wheat is August 7 am $/ liter and October contracts of $7.15 / liter. Suppose you think that the ("spread") between August and October price difference will be more than 15 cents. In this way will trade the? She would be short and go August long contract, contract to sell contract and purchase contracts August October.



Now we are in May and August contract is $7.10 / litre, and in October a contract for $7,35 per bushel. You have chosen to abolish their positions and to fix. For the August $0.10 per litre and $0.20 / comparison index for October alone lost contract. How much? She you scored 0.20-0 = 10.0.10/Comparison index... Since 10,000 did the agreement about $1000 (minus Commission) is your profit.



In the example above you would more money have if it appeared only in October a contract, but because there is no guarantee you hedge your bets, long and short positions and net profit better at the end. Distribution as other set backup strategy protects your profits while minimizing the losses.