Calendar Spreads - The Fundamental QUESTIONS

 Assuming one manage to identify the "pair" to trade. The next questions 

1. WHEN DOES ONE LONG THE SPREAD ?

2. WHEN DOES ONE SHORT THE SPREAD ?

3. WHEN DOES ONE DOES NOTHING/NO POSITION ?

4. WHEN DO YOU EXIT THE LONG?

5. WHEN DO YOU EXIT THE SHORT?

 Is the relatively low margin for spread the reason to trade ? or 

Is it something more challenging that one need to explore ?

Is spread a piece of cake versus open outright futures? 

What are the challenges that one face trading outright futures versus calendar spread?

While the lower margin is one of the reasons to consider calendar spread, one should consider the risk reward profile for both instruments.

Personally, I find calendar spread more challenging as it is NOT about trading a particular month contract but rather trading TWO months.

The relationship between 2 months is "RELATIVE". This "relative" is the basis for LONG or SHORT or DO NOTHING.

1. WHEN DO THE SPREAD RISES and WHAT DOES IT MEAN?

2.WHEN DO THE SPREAD FALLS and WHAT DOES IT MEAN?

What is the correlation between Calendar spread and outright futures? Is there any correlation?

HOW many spread contracts should one take to strike an equivalent of ONE outright futures "effect" if there is correlation?

How does one optimize and balance Calendar spread trade with Futures? 

 

There is NO FREE LUNCH and one need to do detail homework before the adventure!!!  ///