Spread trading and Spread betting

[novais]

Can someone tell difference between Spread trading and Spread betting?

 

[vkmishra]

I didn't gather your question well. However, since no one has replied to it, I am taking some time out to guide your.

Spreads ::!!!! whew !!!

Spreads are preety safe. Do it in Agro, Bullion everywhere you get oppty.

Spread trading can be of several types, the most common is the Calendar Spreads. Here you take opposite positions in the same commodity but in different months. Eg. Say Cardamom,,, June is 460 and Aug is 530. By Experience you know the valid difference should be just 40. In such a situation., you should buy June and sell Aug. at a difference of Rs. 70/-. This difference is due to temperory disorder and low liquidity in the far months.

The difference will come down eventually, as the cash and future arbitrageours will come in the market to take advantage of the situation. They will buy in June or in spot, take delivery and sell-give delivery in Aug.

There are various variants to it.

Spread Betting ---- I believe you are talkin bout Ratio Trading. I do it very successfully, between Gold and Silver. Well details some other time.

Rgrds,

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[novais]

Spread betting is bet on price movement and still illegal in many countries.

Thanks for your detailed reply on spread trading. Follow on questions:

Are there any thumb rules to remember [on calendar spread]?

Like go long for leg which has higher price (mostly far month) and short on lower price leg (mostly near month)?

So over the time reduction in price deffrential (even going to minus) will give benefit?

Please suggest.

Thanks.