I'm talking about futures spreads, not options spreads. [/QUOTE] In your post you said "financial markets". The house applies equally to futures.
I should have stated in the op that it was futures spreads I was interested in. cgarcia thank you for your help I have not yet placed a (futures) spread trade, I know lind-waldock has a relatively easy to use demo and online entry for spreads
Generally all the months of a particular contract move in the same direction,the art of spreading is to predict which month will out-pace the other based on more of a long-term view. Don't trade wheat spreads so not in a position to pass comment but if you look at Eurodollar futures I can give a better example: You think rates will be cut - you should sell spreads,sell the front month and buy further down the curve(obviously on a 1:1 ratio).If you are right the month that you bought will go up further than the month you sold and you will make a tidy profit from your spreads.
A surprisingly well-timed example: Fed cuts discount-rate by a quarter-point,as I type this - Eurodollar March 08 +7 ticks,Eurodollar Sep 08 +14 ticks - being short spreads i.e. selling March against buying Sep before this news turns a spread position into a nice profit - now to figure out where we go from here?
Both will generally move in the same way, the trick is to find which will outperform the other and make sure the cost of ownership doesn't kill you.