QMH06/QMJ06 spread

Discussion in 'Financial Futures' started by loufah, Feb 16, 2006.

  1. The difference between these two has varied by around .25 today. The April future is getting more expensive relative to the March. Is this common when the near future is about to expire, or are there other reasons for this today?
  2. Look up the term "cost of carry" or "futures premium". The later expiration is usually trading at a higher price. If not, then that can be interpreted as a signal for a reversal, etc.
  3. Thanks. I understand the later contracts will generally cost more, but what I was wondering was: why does the difference vary so much on an intraday basis? On that day, the difference between the March and April contracts (I was comparing bids to bids, and generally the bid-ask spreads were both $.025) varied from as low as $1.30 up to $1.55.
  4. For what it's worth........It's possible that the contracts aren't exactly moving in lock-step with each other. The "calendar spread" can actually be reasonably steady but it might seem more volatile because the illiquid month doesn't trade as often as the active month in the spread. For example, the active month can trade 50-cents higher but the illiquid month doesn't trade at all during that time interval. The calendar spread might look as though it has moved 50 cents but the actual bid-ask spread for the calendar spread can remain steady. Does that make sense?