Investments, tenth edition

 Example  22.6 

Speculating on the Basis 

 A related strategy is a  calendar spread  position, where the investor takes a long posi-

tion in a futures contract of one maturity and a short position in a contract on the same 

commodity, but with a different maturity.  

4

   Profits accrue if the difference in futures prices 

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2 2

 Futures 

Markets 

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between the two contracts changes in the hoped-for direction, that is, if the futures price 

on the contract held long increases by more (or decreases by less) than the futures price on 

the  contract  held  short.     

 Consider an investor who holds a September maturity contract long and a June contract 

short. If the September futures price increases by 5 cents while the June futures price 

increases by 4 cents, the net gain will be 5 cents  2  4 cents, or 1 cent. Like basis strate-

gies, spread positions aim to exploit movements in relative price structures rather than to 

profit from movements in the general level of prices. 

 Example  22.7 

Speculating on the Spread