NISM Series XVI - Commodity Derivatives Exam Notes
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An intra commodity spread is made up of a long position in futures contract and a short position in another month contract of the same underlying or another contract of the same commodity with different lot size
Bull spread using futures is created when the actual spread is more than the fundamental spread (average difference) between two calendar month contracts.
Bear spread using futures is created when actual spread is less than fundamental spread (average difference) between two calendar month contracts.
A spread position usually carries a lower margin than an outright position, as net amount of value to be settled tends to be less volatile than outright price
Basis is a measure of the difference between the spot and the futures prices.
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